The Great British Reboot: How the UK Can Thrive in a Turbulent World 9780300252514

An optimistic exploration of how, through radical economic reform, the United Kingdom can prosper and flourish in the ne

257 87 3MB

English Pages 256 [360] Year 2020

Report DMCA / Copyright


Recommend Papers

The Great British Reboot: How the UK Can Thrive in a Turbulent World

  • 0 0 0
  • Like this paper and download? You can publish your own PDF file online for free in a few minutes! Sign Up
File loading please wait...
Citation preview




The Guardian Guide to the UK’s Top Companies, 1995 (Introduction) Hanson: A Biography (with Roger Cowe) Weinstock: The Life and Times of Britain’s Premier Industrialist (with Roger Cowe) The Crunch: The Scandal of Northern Rock and the Escalating Credit Crisis The Great Pensions Robbery: How New Labour Betrayed Retirement Britain for Sale: British Companies in Foreign Hands – The Hidden Threat to Our Economy Bad Banks: Greed, Incompetence and the Next Global Crisis


THE GREAT BRITISH REBOOT How the UK Can Thrive in a Turbulent World


Copyright © 2020 Alex Brummer All rights reserved. This book may not be reproduced in whole or in part, in any form (beyond that copying permitted by Sections 107 and 108 of the U.S. Copyright Law and except by reviewers for the public press) without written permission from the publishers. For information about this and other Yale University Press publications, please contact: U.S. Office: [email protected] Europe Office: [email protected] Set in Minion by IDSUK (DataConnection) Ltd Printed in Great Britain by CPI Group (UK) Ltd, Croydon, CR0 4YY Library of Congress Control Number: 2020943374 ISBN 978-0-300-24349-9 A catalogue record for this book is available from the British Library. 10 9 8 7 6 5 4 3 2 1


To my late parents Hilda and Michael Brummer of blessed memory




Preface viii

Chapter 1 Land of Hope and Enterprise   1 Chapter 2 Brave New World 26 Chapter 3 Masters of the R&D Universe 65 Chapter 4 White Hot Technology 97 Chapter 5 Creative Genius: Gaming to the Oscars 123 Chapter 6 The Moneytree: Greed, Locusts 158 and Hipsters Chapter 7 A Nation Divided: The Battles of 187 Geography, Generations and Goods Chapter 8 Governance: Taking Back Control! 220 Chapter 9 Infrastructure: Trains, Phones and Planes 255 Chapter 10 Heritage: Back to the Future 285 Chapter 11 Onwards and Upwards 305

Notes 320 Select Bibliography 332 Index 334



The origins of this book date back to the UK’s European Union (EU) referendum campaign in 2015–16. Many of the arguments rehearsed here have been reinforced by the Covid-19 pandemic of 2020 which tragically has cost so many lives in Britain and across the globe and has devastated the world economy. Unlike many of those who supported the UK leaving the EU, my views have never been influenced by the cry to take control of our borders or by calls to limit immigration. On the contrary, as the son of a refugee from the Holocaust who found tolerance and economic security in the UK, I find it hard to criticise immigration. And I recognise that among the factors in Britain’s improved economic performance in recent decades has been the country’s absorption of large numbers of immigrants. I also understand that this has been regarded in many quarters as a mixed blessing. Immigration has placed extra pressure on the UK’s public services, such as schools and housing. It has also brought a variety of new talent to these shores, from the now-clichéd Polish plumber to the brilliant nurses and care workers who support the National Health Service (NHS) and the social care system. Indeed, the coronavirus pandemic, which killed so many and caused so much damage to prosperity in 2020, in many ways underlined the value of immigration to Britain. In the war against Covid-19 many of the medics and auxiliary staff working on the front line in the NHS and in the nation’s stricken care homes came from overseas, and a disproportionate number of health workers in the black and minority ethnic (BAME) communities gave their lives for others in combatting the virus. In the hospitality industry, hard hit by the viii

PREFACE pandemic, overseas employees immeasurably improved standards of service, and supermarket heroes and logistics workers performed miracles during the UK’s lockdown nightmare. Among the arrivals have also been brilliant scientists who played a hugely important role in tackling the pandemic, and aspirational entrepreneurs who have helped grow the economy before and since. As the referendum campaign of 2015–16 proceeded I became increasingly frustrated by the negative attitudes of those who supported ‘Remain’. I fully accepted that leaving the EU would be disruptive and might have an impact on household incomes and growth. I could not believe, however, that the impact would be anywhere near as dramatic as that of the financial crisis which suppressed earnings for a decade. As it transpired, of far more immediate consequence has been Covid-19. The economic fallout from lockdown in the UK and across the globe has been calamitous. The collapse of trade, loss of output and surge of joblessness has been greater by a long chalk than in the Great Depression of the 1930s. The pandemic has also changed public perceptions of the role of the state and government in our society. In efforts to insulate populations from its worst effects, interventions by governments and central bankers in countries across the world have been on a scale never before seen in peacetime. It has made it all the more necessary for the UK’s politicians to rethink priorities as we emerge from the slump caused by the coronavirus and face up to the new realities of Britain outside the EU. It was the breakdown of the banking system in 2008 and the subsequent decade of constrained public spending and austerity measures that contributed to the increased homelessness and use of food banks decried in the national conversation, not the decision to leave the EU. Social deprivation in the world’s fifth-largest economy is intolerable. But it is a narrative about modern Britain which should not be allowed to obliterate the positives of a flexible labour market, record low unemployment, growth and innovation. Though lockdown brought those to an abrupt halt on 23 March ix

PREFACE 2020, even in the most challenging of times, there was hope to be gleaned from brilliant sectors of the economy such as the life sciences and technology. Moreover, amid the darkness of pandemic a new sense of community cohesion was seen. At local-authority level the homeless were picked up from the streets and housed in hotel accommodation. There was a surge in small neighbourly acts of generosity and charitable support groups. In my own area of suburban London, neighbours set up a help app for mutual support for the elderly and vulnerable. Craft gin distillers rapidly converted operations to the production of alcohol-based sanitizers for local health providers. Crisis provided a recipe for good citizenship and refreshed the Leave priority of establishing a better social settlement in Britain. The 2009/10 euro meltdown, which spread from Greece to the rest of the European Union, provides a sharp reminder of how dysfunctional the eurozone, home to seventeen of the EU’s twentyeight members (including the UK), is as a coherent economic and financial bloc. The rise in unemployment across the region was particularly alarming, especially as much of the burden fell on the young. In Greece, Italy and Spain, youth unemployment peaked at between 40 and 50 per cent. Such levels of joblessness were unconscionable and heralded a lost generation, many of whom have yet to find work – a sobering experience offering insight into a problem the UK could be required to tackle after the pandemic. As disturbing in Continental Europe was the way in which economic dislocation, coupled with a backlash against immigration from outside the EU, spilled over into political extremism. As a reporter in Athens at the peak of the Greek crisis, I was shocked to hear that marauding gangs of Golden Dawn supporters, dressed in fascist black, had set upon Albanian immigrants. Across the region, extremist parties, many of them holding racist views, were on the march: the Front National (renamed the National Rally) in France, the Alternative für Deutschland (AfD) in Germany, the Five Star movement in Italy, and Jobbik and the increasingly extreme x

PREFACE ruling Fidesz Party in Hungary did not reflect well on the success of the European project; they recalled instead the troubling politics of the 1930s. This was a very different picture to that of the benign EU portrayed by former Prime Minister David Cameron, his Chancellor George Osborne and other Remain campaigners when lauding the UK’s ties to Europe as the building blocks of the country’s democracy and prosperity. My disaffection with the workings of the eurozone and the efforts of Germany to impose unnecessarily harsh budgetary and monetary remedies on the weaker countries in the EU caused me to question why the UK should want to be part of such a dysfunctional club. It led me to focus on what the UK did well and whether it would be much harmed by being outside the EU. The UK is largely a service-driven economy. It also has a valiant history of withstanding political, economic and financial shocks – from the bombings of the Blitz to the traumas of devaluation and borrowing from the International Monetary Fund (IMF) in the 1970s to exiting the European Monetary System (the predecessor to the euro) in 1992. So it was no surprise to me that in the spring of 2020 the UK was in the vanguard of the Group of Seven’s richest Western nations in the economic, financial and social response to Covid19. Boris Johnson’s Conservative government abandoned the traditional verities of fiscal responsibility and monetary prudence. It moved rapidly and radically to combat disorderliness in the financial markets and attempted to create conditions under which the UK could bounce back from both the public health emergency and the economic shock. Since the 1980s, the UK economy has been transformed. A modernised car manufacturing industry has emerged from the rubble of the past, but the real strengths of the UK economy are to be found in the City of London, the country’s world-class research universities, and in its mastery of technology and its creative industries. What is seldom acknowledged is that, while standards for many of these activities may be set in Brussels, most of the service xi

PREFACE sector is not covered by trade agreements. That could be the ultimate prize for the UK outside the EU, and that, together with powering the recovery from the Covid-19 shock, provides much of the focus of this book. As the City Editor of the Daily Mail for two decades, I am fortunate to enjoy close and regular access to the government’s opinion leaders, the Bank of England, think tanks, chief executives and the chairpersons of most of our great FTSE 100 companies. Many individuals have been exceptionally helpful in framing my views, but I do not intend to single anyone out in search of spurious authority. Suffice it to say, without these executives, professionals and opinion formers making time for long conversations and interviews (some of them cited in the text), I would have struggled to make sense of how best we can seize back command and control of our economy and industry and reboot and usher in a new era for the country. If errors have crept into the text it is entirely down to my own carelessness and time constraints – writing a book and a daily column at the same time – and has nothing to do with those who were interviewed. In researching this book I received tremendous help from my great friend and former Guardian colleague Norman Hayden. In this piece of work, as with previous volumes, Norman has helped shape the chapters and provided wise advice and words. It is terrific that we are still able to work so peaceably together. I am also indebted to the chairman of Associated Newspapers, Paul Dacre, my former editor, for allowing me to rehearse many of these arguments in the Daily Mail in the run-up to the Brexit referendum and beyond. My current editor, Geordie Grieg, has been equally helpful in allowing me total freedom to express my views on both the economic impacts of Brexit and the potential benefits of HS2, even though he may not have always been in full agreement. I make special mention of the former Head of Features Leaf Kalfayan, his successor Liz Hunt and their team who shepherded so many of my articles covering the Brexit years and coronavirus crisis into print, xii

PREFACE and allowed me to publish the bright prospects for a future outside the EU in the heart of the paper. Thanks also go to my close colleague Ruth Sunderland, the Daily Mail’s Business Editor, with whom I have often disagreed about the EU, infrastructure, battling Covid-19 and much else. She was in the Remain camp as I banged the Leave drum; but our internal debates, unlike those in the Commons and on the BBC’s Question Time, have always been civilised and her intelligent views have been helpful in moderating my own. She also tolerated my absences as I brought this project to fruition. In writing this book, which focuses on the broader national interest, I had great input and advice from Jonathan Pegg, my literary agent. He and I have worked together in harmony for almost two decades, and long may it last. At Yale University Press London, in the heart of intellectual Bloomsbury, my gratitude goes to my former editor, Taiba Batool, who saw the value in the project. Editorial Director Julian Loose subsequently made many helpful suggestions and guided me towards publication. As with my previous books, my son, Dr Justin Brummer, helped with technical advice and compiled the bibliography. Special mention, of course, to my wife Tricia Brummer. She and other family members have learnt that mornings on holidays – whether in Italy, Greece or on the eastern coast of the United States – are for writing rather than sightseeing and lying on the beach. Tricia is always tireless and patient in her support. London, June 2020





In a democracy the national interest is what a majority, after discussion and debate, decides are its legitimate long-run shared interests in relation to the outside world. Joseph S. Nye Jr, former dean of Harvard’s Kennedy School of Government, July 1991 The UK’s annulment of its membership of the EU on 31 January 2020 was a signal moment in the nation’s history. Embraced with energy, enthusiasm and enterprise, it offers a marvellous opportunity for Britain to reset its relationship with the rest of the world and reboot its economy, its society and its governance. It represents a momentous break with the past, which in its own way should be every bit as decisive as many other events that have reshaped the national narrative. It is part of a continuum that dates back to the triumph of the Protestant ethic, starting with the Glorious Revolution of 1688 and the abolishment of the Corn Laws in 1846, which set the world on the path to tariff-free trade, the abandonment of the gold standard in 1931 and the Thatcherite free market upheaval of the 1980s. When the coronavirus pandemic struck the UK in 2020, the nation was able and willing to take independent action to overcome the frightening disruption to output without reference to fiscal rules and regulations, such as those banning state subsidies, set by the European Commission in Brussels. The UK’s new status outside the EU provides an enormous opportunity for the country to refocus on what we are good at and where Britain wants to be vis-à-vis the rest of the world – and a 1

THE GREAT BRITISH REB OOT stronger vision is all the more necessary to tackle the damage to the nation’s business, self-confidence and cohesion caused by Covid-19. It is to my eternal frustration as an economic and business commentator in the national press how little interest there has been in the longer-term issues that face our country and how little pride we take in doing what we are good at. In my 2012 book Britain for Sale, I sought to show how much we were losing in terms of culture and the nation’s industrial future by being so open in allowing overseas enterprises to buy up key companies without thorough scrutiny. Britain’s new post-Brexit status of looking outwards to the world requires the nation to rethink its place. It should be said that the British economy performed extraordinarily well from 1973 to 1993, when the ‘less integrated’ European Economic Community (EEC) first adopted the single market. During this period, output per person, or gross domestic product (GDP) per capita as economists would describe it, climbed by 117 per cent in the UK.1 In the subsequent period, from 1993 to the time of the UK referendum in 2016, GDP grew by a further 57 per cent. In so doing, Britain outperformed some of its competitors on the Continent. What the data cannot impart is how much of this outperformance can be attributed to the UK being part of the EU and the single market and how much was dependent on other factors. One school of thought is that the radical reforms of the economy and the financial system in the 1980s – the deregulation and privatisation at the core of Margaret Thatcher’s programme – unleashed the animal spirits of free market capitalism. It was these fundamental changes to enterprise and entrepreneurship that provided the backdrop for a recovery from industrial decline. Going global does not mean that the UK must turn in on itself. It requires the country to be free to make its own decisions about policy rather than being swept along on the European tide. Whereas it is imperative that the UK retains its status as an open trading nation, maintaining healthy political, security, trading and economic relations with the EU is part of that. It is not a case of 2

LAND OF HOPE AND ENTERPRISE substituting Europe with the rest of the world; the world has not stood still during the UK’s membership of the EU. Although the United States remains the pre-eminent global economy, in the early twenty-first century it has been closely challenged by China in terms of economic leadership. This book looks at the changing shape of the global economy and how increasing volumes of UK trade – notably in services – have moved to the rest of the world. The scale of the UK’s competitive edge is often underestimated. The country needs to preserve and build on its comparative advantages in its great research universities, its financial services, its high tech, aerospace and creative industries, and much more. In subsequent chapters I seek to examine in some detail the contribution that these often scantly recognised activities make to the UK economy. Much of the progress in research, pharmaceuticals, technology, software and innovation can be traced back to the intellectual powerhouses of our institutions of higher learning – all key players shown at their best in meeting the challenge of SARS-CoV-2 in 2020 – and I shall examine their role in Britain’s story in some detail. We often get glimpses of the nation’s creative sectors from the daily ‘tick tock’ of media coverage: the bestselling Harry Potter books of J.K. Rowling, the award-winning exploits of 1917 film director Sam Mendes; the performances of global superstars Adele and Ed Sheeran; the influence of Richard Rogers on architecture around the world; and much more. What we don’t recognise is that this is a part of a much broader tale of invention and creativity that stretches from design to video gaming. The country has a love–hate relationship with the City of London, and the banks are still blamed for the financial crisis of 2007–09 and the subsequent stagnation and fall in incomes. Yet in many ways it is the UK’s rapier. Finance is the highest UK earner of overseas income and is a magnet for international institutions. The City is the biggest financial centre outside New York and, contrary to expectation, has attracted even greater numbers 3

THE GREAT BRITISH REB OOT of skilled financial traders since the EU referendum result of 2016. With the coronavirus lockdown and social distancing measures in 2020 hurting great swathes of the economy, particularly aerospace, hospitality and retail, amid all the carnage of lost output and jobs the UK financial sector did what it was meant to do by accommodating trading, providing credit (with the help of government guarantees) and raising new capital for troubled firms and those seeking post-Covid-19 opportunities. Though the challenges have been made far tougher by the legacy of the pandemic, maintaining the City’s hegemony and grasping the promise of next-generation financial technology will be essential in carrying forward past successes into the post-EU-membership era. In this book I seek to look in more granular detail at the good stuff that so often gets omitted from the political dialogue in the UK, and to describe what needs to be done to underpin progress. Huge amounts of work are required to heal social and geographical divides. Poor productivity, which is an inhibitor of output, must also be tackled. Exacerbated by the pandemic, unemployment, particularly among 18–24-year-olds entering the workforce for the first time, poses a particular problem. Covid-19 showed how government can adapt to new circumstances in extremis, and also exposed how over-centralised state-run institutions – including the NHS and Public Health England – find it hard to think outside of the box. The generational divide, laid bare by the debate that preceded the UK’s divorce from the EU, is also discussed. The long three-and-a-half years of anguish over the decision to leave the EU exposed unattended fissures in the country’s political, judicial and governance systems. Constitutional change has been piecemeal and threadbare, and I make the case for a thorough overhaul. One of the most significant economic problems in the years following the financial crisis has been low productivity, with growth lagging over a period of several years. To address this, we require smarter and faster adoption of the digital economy, which in turn requires better and faster broadband coverage and connectivity. 4

LAND OF HOPE AND ENTERPRISE Following in the footsteps of the Victorians, building new physical, greener and digital infrastructure is part of that. Chapter 9 looks at the priority projects, the climate change agenda and the low interest rate environment. These constitute a big step forward. It will require the Conservative government of Boris Johnson, elected with a large majority in December 2019, to make serious long-term decisions on what is in the best interests of its citizens – though the battle against the coronavirus and economic desolation has left little bandwidth for longer-term thinking. The UK needs to inspire a new generation, many of whom were alienated by the country’s divisive Brexit debate and left frustrated by the stringencies and consequences of the pandemic, with a new vision for the country. The global economy has changed radically in the near five decades since we joined the EU. Although the EU has been beneficial to the UK in some respects, the act of leaving offers our nation an opportunity to refocus and embrace fresh horizons. The UK is still living with the consequences of past decisions. The pledge by the government to level up the North, the Midlands and other neglected parts of the country is a case in point. It requires a huge amount of willpower and resources. Infrastructure investment will be vital, but no one should underestimate how long it will take to come on stream. It needs to be supported by tax incentives of the kind used to restore pride to Merseyside in the Thatcher era, and by putting more public service support, including civil servants, on the ground. In March 2020, the announced intention of Chancellor Rishi Sunak to move thousands of staff from HM Treasury in London to the North of England was a step in this direction. One of the big frustrations in areas of the country that voted to leave the EU is poor transport and communications. That is why investment in modern infrastructure, from ultra-fast broadband to improved commuter transport across the North, is essential. The lockdown experience of 2020 only served to highlight the value of superfast broadband, the rollout of 5G and new communications technologies for the millions of workers and entrepreneurs who 5

THE GREAT BRITISH REB OOT found themselves working and running their businesses online and from home. Some big decisions, such as the controversial decision to go ahead with the high-speed rail link from London to Birmingham and onwards to Manchester and Leeds, have already been taken. There are also pledges to invest heavily in bus services and connections and to make cities more cycle-friendly. There can be no Northern Powerhouse, as envisaged by former Chancellor George Osborne, unless urban connections are addressed. A root-and-branch reform of the way in which the utilities are regulated and how their obligations are enforced is also needed. Overseas ownership of vital utilities and important sectors of the economy is not intrinsically bad in itself. Andy Haldane, the chief economist at the Bank of England and chairman of the Industrial Strategy Council, argues that some of the internationally owned companies are the best run in the UK. In an interview in his office overlooking the Bank of England’s lush courtyard, Haldane told me: ‘If you look at foreign-owned companies operating here, their levels of productivity are a multiple of domestically owned companies . . . Exposure to international competition, to international flows of people, to international ideas and best practices, managerial and otherwise, does appear to have helped lift the spirits of corporate Britain.’2 Of course, there is no shortage of examples of foreign takeovers working for the greater good: BMW’s resuscitation of Mini in the Midlands and Rolls-Royce Motors in West Sussex amply demonstrate how overseas can work in the broader national interest. However, the contrary can also be true. Overseas ownership of and debt fundraising by the water utilities saw money that could have been better used for replacing outdated and leaking mains being funnelled into offshore tax havens by the new owners. Similarly, foreign ownership of four of the big six energy companies has meant that vital decisions on future nuclear generation have been made in Berlin and Paris rather than in Whitehall. The greatest failure, in my view, is Britain’s loss of vital technologies from our great universities. The UK has some of the foremost 6

LAND OF HOPE AND ENTERPRISE research universities in the world; funded by the UK taxpayer, over recent decades they have also benefited from EU support. This success has been greatly enhanced by an open architecture which has welcomed scientists and researchers from around the globe. The UK reaped the benefit from the now diminishing cadre of émigrés from Nazi Germany – this includes people such as Sir Hans Kornberg, former professor of biochemistry at Cambridge, who carried out vital research into how organisms convert food and oxygen into energy and tissue, described by one obituary writer as ‘the combustion engine of life’. UK universities and research institutions have been at the forefront of mapping the genome. They have also been responsible for breakthroughs in robotics, artificial intelligence and developing the software behind videogames and financial technology. These are all areas where the UK, with the right focus, vision and investment, has an opportunity to re-establish itself as a source of excellence, not just among our neighbours in Europe, but across the world. However, software and technology created in Britain is too often lost because of insecure financial backing and a failure to examine whether early stage acquisitions by international players is depriving the country of research and development (R&D), patents and products developed here. The UK takes a ‘disproportionate’ share of the European venture capital pool, according to Haldane, but that does not translate into companies that deliver for the country: ‘Relative to the United States we do somewhat less well. One area is the move from start-up to scale-up.’3 A case in point is the 2019 purchase by digital giant Apple of Spectral Edge, a Cambridge-based photography start-up spun out of the research labs at the University of East Anglia five years earlier.4 Spectral Edge software fuses together multiple versions of the same image to improve photo quality. The value of this to Apple is immeasurable, given that the iPhone historically lagged behind its Samsung rival on the quality of its photographic images. But Spectral Edge also has valuable security applications in that it can be 7

THE GREAT BRITISH REB OOT used to enhance images from surveillance cameras. The sale of the company, which raised $5.3 million from venture capital groups, was, like so many transactions of this type, conducted below the radar. Yet this is precisely the kind of technology, based on UK software excellence, which should have been subject to a national interest judgement before the sale was approved. The UK has never been good at long-term thinking when it comes to investing in future technologies. Much of the nation’s success has been built around serendipity. As we move into the twenty-first century and face a much more competitive world, with the rise of newly rich nations from Asia to Africa, we need to preserve, concentrate and be visionary about Britain’s inventive and entrepreneurial skills. The UK must recognise the intellectual and commercial value it offers the rest of the world. It also needs to rediscover the adventure and ambition of our forebears. The saddest aspect of Britain’s departure from the EU for me, as an economic and financial writer and commentator for national newspapers since the early 1970s, is the failure of the current generation of politicians to engage with the voters on the same intellectual and foresighted level as some of their predecessors. Instead, the whole Brexit discussion consisted of what the economy did in the last quarter, endless squabbling about false promises made in a dispiriting referendum campaign, the devaluation of expertise, worthless shorthand about jumping off cliff edges and empty intergenerational rhetoric. The mediocrity of the political classes infected the whole of society. It left those voters who voted to leave utterly confused with no clear vision of the potential sunny uplands. The UK’s businesses totally failed to engage the public in the referendum debate and retreated on making capital commitments. The years of wrangling at Westminster stymied business investment and confidence and pummelled output. The worst economic outcomes of plunging output and high unemployment have not materialised, though – but nor has the great leap forward predicted 8

LAND OF HOPE AND ENTERPRISE by a band of Brexit-supporting economists. Instead, growth has chugged along at below-trend levels. It remains to be seen whether Covid-19 proves to be a perverse game-changer in terms of a lasting embrace of new technology, use of more robotically driven manufacturing systems and acceptance of flexible working – imposed out of necessity in the grip of pandemic – and whether such a sea-change spurs growth. The remarkable aspect of all the uncertainty created by the European divide, in spite of an obscured future not clarified until the Conservative Party gained a substantial majority in the December 2019 general election, was that the UK continued to create new jobs in record numbers. It was less expensive to shore up labour and protect jobs ahead of a new immigration regime than to modernise information technology (IT), build new plants or invest in fresh office capacity. During the political interregnum, it was often overseas executives running great British companies such as Unilever who came to the barricades in defence of what Britain does best. Unilever’s chief executive, Paul Polman, fought for his company’s independence in the face of foreign marauders from Brazil, and in so doing reflected the strong national interest argument. Unilever spelled out the value of British R&D, creative marketing, legacy, corporate tax contributions and the value added by having a powerful, outward-looking headquarters that embraced broader society. It contrasted with the dispiriting and downbeat narrative presented by the employers group, the Confederation of British Industry (CBI), and so much of business. It is no wonder that the public was gulled into fearing for the nation’s future outside the EU. During the political stalemate of 2016–19, a highly intelligent 40-year-old business high-flyer confided to me that it would take half a century to recover from the shock of Brexit. If someone of his calibre has been so worn down by the national dialogue, there is a colossal repair job to be done. A new collective vision of Britain’s capabilities and opportunities is required. 9

THE GREAT BRITISH REB OOT The successful defences to overseas takeovers by companies such as pharmaceutical powerhouse AstraZeneca provide a sharp reminder of what the UK loses when emblematic companies such as Cadbury, ICI and Scottish & Newcastle disappear into foreign ownership. AstraZenaca’s French chief executive Pascal Soriot brought the company’s scientists together with pioneers at the University of Oxford to spearhead and fast-track the first vaccine against SARS-CoV-2. When the share prices of much of industrial Britain were plunging at the start of and during the coronavirus pandemic, AstraZeneca’s rose, making it for a time the most valuable company in Britain with a stock market value of £110 billion. When companies are sold to overseas buyers command and control switches overseas, limiting the impact the UK authorities and a broad range of stakeholders have on decision-making. In the case of utilities, policies affecting UK energy, water services and the railways end up being made in foreign capitals, not in the UK. Headquarters and marketing skills are diminished. The ecosystem of small traders, ranging from dry cleaners to sandwich shops, is damaged. R&D budgets – a key to future growth – are axed and the tax base of the country is eroded. The sale of Boots the Chemist in 2007 and Cadbury in 2010 were rapidly followed by a shift of tax domiciles to Switzerland. Intellectual property – paid for by the taxpayer through the education system and R&D support – passes into foreign hands. The UK gold standard of environmental, social and governance responsibility is erased. This is especially true when, as is often the case, the buyers are private equity firms. Private equity works on the basis of working behind closed doors without the scrutiny that comes with being a publicly quoted enterprise. The UK’s departure from the EU provides an opportunity for the UK to regain the high ground and pursue the national interest in the way business is conducted with greater willpower, verve and imagination. Brexit provides the opportunity to ‘reboot the satnav’ that will determine the country’s future course. 10

LAND OF HOPE AND ENTERPRISE The Britain of the first two decades of the twenty-first century was characterised by finance and short-term thinking being allowed to drive the economy. The New Labour governments of Tony Blair and Gordon Brown (1997–2010) were so determined not to interfere with the free market that the finance industry was allowed to run riot. The City of London gained tremendously as American and Continental investment banks exponentially expanded. Hedge funds, shareholder activists and private equity firms took up residence and the exchequer benefited from taxes paid on profits and bonuses. The glorification of finance triumphed over the need for the UK to back, preserve and develop well-run enterprises. What followed was equally problematic. The financial crisis hit the UK particularly hard because it had put so many eggs in the City basket. Soon after it emerged from the doldrums, the UK was affected by the crisis in the eurozone, closely followed by the political build-up to the EU referendum, and more recently the challenges in confronting the pandemic, lockdown and social distancing. Business has too often been sacrificed on the altar of finance, politics and short-term thinking. The ‘financialisation’ of the economy became infectious. Chief executives, the directors of public companies and shareholders too easily succumbed to short-term gains in the shape of ‘fat cat’ bonuses or buyouts. The whole system, including the salaries and considerable fees that consultants, lawyers and big audit firms earned, became rigged in favour of immediate gratification. In this unsavoury moneygo-round, the City, Whitehall and the fund managers who look after our pensions and savings too often lost touch with the greater public interest. In this scramble for personal worth, market share, heritage, great brands, valuable assets, critical skills and training, R&D, patents and much more were often relegated to second place. The FTSE 100 Index of the UK’s top companies became increasingly narrow; it became the province of companies from around the globe. UK manufacturing occupants were largely confined to a handful of national champions, such as the pharmaceutical giants 11

THE GREAT BRITISH REB OOT AstraZeneca and GlaxoSmithKline, fast-moving consumer goods companies Unilever and Reckitt Benckiser, and distiller and beer group Diageo. Many other manufacturers, port owners and a good number of the utilities fell into foreign hands and, when the FTSE 100 pickings were exhausted, the financiers turned their attention to second-tier FTSE 250 firms such as the aerial refuelling pioneer Cobham, creator of some of the nation’s most innovative aerospace technology. Much of the business world seemed to think that being part of the EU was sufficient to protect Britain’s prosperity. Europe-wide supply chains and a ready market of 500 million people – two of the underpinnings of the Remain camp’s pitch – made an immensely persuasive argument. If economics tells us anything, trading with neighbours is more efficient and logistics problems can be more easily overcome. But it has not all been upside. The lack of efficient resource transfer mechanisms in the EU and the straitjacket of being part of the eurozone has led to stagnation and high unemployment. Moreover, whereas the EU market may be large, the opportunities (with the notable exception of finance) are harder to come by because of the duplication of activities across the area, from car manufacturing to chemical industry to high fashion. European companies found it far easier to buy into corporate Britain than UK firms did buying into the rest of the EU. At one stage in the ‘roaring noughties’, the microstate of Iceland was able to access large amounts of debt to acquire great chunks of the UK’s high street, including the House of Fraser department store chain, the emblematic West End toy shop Hamleys and the eponymous grocery chain Iceland. The Deutsche Börse made two failed attempts to take over the London Stock Exchange (the most recent in 2018) in an effort to gain a foothold in the City. It was eventually thwarted by a robust intervention from the European Commission competition authorities. In 2013, the French electrical group Schneider snapped up British engineering and electronics concern Invensys for $5.4 billion, further eroding Britain’s industrial base. 12

LAND OF HOPE AND ENTERPRISE The focus on trading with Europe and doing cross-border deals in the EU was a distraction from the broader changes taking place in the global economy. The German car manufacturers and engineers firmly set their sights on exporting to China and the Pacific. Individual UK companies pressed their case in the Far East, including the classic fashion group Burberry, Diageo and big pharma, as Chancellor George Osborne sought to put down stronger roots in China. Osborne took credit when the China Investment Corporation (CIC), the country’s sovereign wealth fund, bought 8.6 per cent of the company behind the UK utility group Thames Water in January 2012. Osborne also boldly decided to become a founder shareholder in the new $50 billion Chinese-controlled Asian Infrastructure Investment Bank (AIIB) in 2015. The new Pacific-focused bank was designed as a rival to the World Bank, in which Britain is a big stakeholder. However, the UK’s effort to ingratiate itself with Beijing drew the ire of the Obama administration in Washington. The White House took the unusual step of issuing a statement noting that it was a sovereign decision and demanding that Britain ‘use its influence to ensure that high standards of governance are upheld’.5 Reaching out to China and courting a role in the Belt and Road Initiative (BRI), or new Silk Road, a global development strategy adopted by the Chinese government in 2013, looked sensible. The large-scale project involved infrastructure development and investment in 152 countries and international organisations in Asia, Europe, Africa, the Middle East and the Americas. But like much else in the run-up to the referendum, the enthusiasm for building closer links with Beijing and the raison d’être for joining the AIIB were drowned out by domestic political wrangling. The wisdom of drawing closer to China was to resurface in 2019 when the UK government found itself under pressure from the US to avoid using the Chinese telecoms group Huawei to roll out the new 5G mobile telecoms network. In early 2020, the Johnson government, under pressure from mobile operators, defied the US and agreed to allow Huawei a role. The pressure to undo this decision 13

THE GREAT BRITISH REB OOT and give China a wide berth increased during the Covid-19 pandemic. Voices on the Conservative right demanded that China be required to pay a price for unleashing the coronavirus in the wet markets of Wuhan. Relations with Beijing deteriorated when the Chinese parliament approved a tough new security law for Hong Kong in May 2020. The political difficulties of reaching out to China, together with domestic UK opposition to some aspects of a deeper trading relationship with the US, illustrate the challenges of becoming more global. As a relatively small country seeking to carve out an international path between the competing interests of the US and China, it was never going to be comfortable. As the UK made its escape from the EU, the barriers to trade have been going up rather than coming down. In such a climate the UK should not underestimate the difficulties of being more global. Membership of the EU had offered a comfort blanket to corporate executives, boards and enterprises with regard to making bolder decisions about investment, sales and marketing. It also encouraged government departments to focus most of their resources on Brussels, which set the parameters for trade relations with the rest of the world. The EU was an excuse for the UK to avoid making fundamental changes in its trading relationships, leaving it to simply to muddle through without any clear plan of its own – it had the effect of defenestrating the UK as an independent trading force in the world. The fact that some of our best research-based companies, creative industries and financial services providers have had a measure of success in reaching out to a broader universe has been despite EU membership, not because of it. So many of the services that the UK does sell to the world outside the single market are the result of domestic ingenuity rather than being part of a sclerotic trading bloc where British interests have to be traded off against those of Germany, France et al. In the end, the preservation of the national interests of the other large EU members has always trumped those of the UK. 14

LAND OF HOPE AND ENTERPRISE This was evident in 2012, when Britain’s largest defence and aerospace company, BAE Systems, explored a merger with EADS, since renamed after its main offshoot, Airbus. There were strategic reasons why the deal was problematic, not least because of BAE’s special relationship with the Pentagon, which allowed it to compete for American military contracts. In the final analysis, what killed the transaction was the opposition of German Chancellor Angela Merkel. She feared that in the shakeout and rationalisation that would follow, the UK and France, with their greater defence and aerospace expertise and technology, would win out, causing factories to close and jobs to be lost in Germany. Berlin’s national interest triumphed over the case for a broader, strategic merger. The veteran US scholar of the presidency, Professor Joseph S. Nye of Harvard, has written that the strategic interest of a country and the national interest are not one and the same; the latter encompasses the broader interests of the majority of the people.6 I would argue that in the case of the UK the national interest has too often been ignored in favour of a greater strategic interest: keeping faith with our partners in the EU. Outside the EU, or in a looser trade arrangement with Brussels, the UK has a once-in-a-generation opportunity to preserve and promote excellence in Britain and push the country on. The main requirement is a different and demonstrably truer national narrative. The government needs to rise above the malaise that preceded the final Brexit vote to leave the EU in January 2020. That means rising above the destructive partisanship that has caused such economic damage, addressing the intergenerational issues that came to the fore in the Brexit debate, and supporting the next generation hit hard by the coronavirus pandemic and lockdown. As Paul Johnson of the Institute for Fiscal Studies told me in May 2020, it is time to ‘shift resources to support and value further and technical education and ensure those in vital sectors are well educated, well trained and properly valued’.7 I passionately believe that we can turn our perceived challenges into successes with imagination, willpower and determination. The 15

THE GREAT BRITISH REB OOT political dialogue is afflicted by a failure to recognise the national interest. The narrow inward perspective of the ‘little Englanders’, associated by some critics with the Leave cause, must be rejected. Instead, going global means fully exploiting the UK’s comparative advantages in a range of areas, from the creative industries to the life sciences, finance and technology. No longer can the narrow horizons of business be to sell off to the highest bidder. Government and Whitehall support for the 2016 sale of the UK’s most highly valued high-tech microprocessor design and software development company, Arm Holdings, to Japanese telecommunications company SoftBank Group mistakenly identified the national interest as showing the UK was still open for business. But the real national interest was in keeping world-leading smart chip technology in Britain, allowing it to develop into a national leader with a big foothold in the digital world, and ensuring the skills base in the UK would not be eroded. It was certainly not in the UK’s interest when Softbank sold a 51 per cent stake in the company to a Chinese-led group of investors in a deal worth $775.2 million. Using fast-track British takeover rules, the original Arm transaction was rushed through with the minimum of scrutiny. Although commitments on preserving jobs and stepping up R&D budgets were made at the time Softbank took over Arm, it was never imagined that the sensitive technology at the core of the company would end up in the hands of Beijing. The UK’s new relationship with the EU does not necessitate a return to a sepia-tinted past that recreates colonial times and focuses on the Commonwealth. The nation severed those ties when Tory Prime Minister Harold Macmillan recognised the ‘wind of change’ blowing through Africa in 1960. A Labour successor, Harold Wilson, followed by signalling the UK’s withdrawal of forces from east of Suez in 1968. Britain’s need is for a different vision, a vision that embraces the nation’s heritage and builds on all that is brilliant about this country and how it can best be delivered across the globe. The narrative that the UK is somehow a spent 16

LAND OF HOPE AND ENTERPRISE force and that its prospects and intellectual capacity outside the EU are doomed needs to be demolished. As in any country, problems cannot be brushed away. The immediate return to more normal politics after the UK left the EU opened the way to addressing legacy issues, including the aftermath of austerity in the shape of food banks, homelessness and the North–South divide. The tragic interlude of Covid-19 and its economic fallout diverted attention from the narrative of Britain’s role in the world. However, neither Brexit nor the pandemic should be allowed to hijack the brighter story to be told, which too often is obscured by pessimism. As will be discussed in later chapters, Britain has four of the best-ranked research universities in the world. The scientific, technological, patent and human capital that emerges from their cloisters is a passport to economic success in the twenty-first century and a bridge to the rest of the world. It is no accident that our top universities are filled with the best and the brightest academics, researchers and students from China, India, South Korea, the Middle East and the US. Global excellence attracts the most brilliant thinkers and minds and keeps our universities in the top ranks. There they can compete with much better endowed American universities, such as Harvard, Stanford and Yale. Political consensus is required to recognise their importance to the future and the gains to be made by increasing support for the Russell Group universities. Further, more respect is due to the technological excellence and innovation in the former polytechnics, which have often been denigrated for offering ‘lesser’ academic degrees in areas such as media and entertainment studies. Such attitudes fail to recognise that many such degrees feed into the skills needs of the UK’s flourishing creative sector. The Blair–Brown government policy of raising the number of graduates in Britain to 50 per cent of young people leaving school was criticised on the grounds that it was expensive and produced the wrong kind of graduates. What it means, however, is that employers in the UK are now able to call upon one of the best-educated 17

THE GREAT BRITISH REB OOT workforces in the world. But much more needs to be done, especially in technology education. That will require investment in new-generation, vibrant ‘private’ technology universities that can reskill citizens. The publicly quoted digital education group, Pearson, has been a trailblazer, launching Pearson College London in 2012 offering a range of undergraduate and postgraduate programmes, with Pearson Business School offering vocational degrees awarded by the University of Kent. While being part of Europe and the single market contributed strongly to Britain’s economic renaissance in the post-Thatcher era, during the same period the global economy also went through enormous changes. The industrialisation and rise of China to become the world’s second largest economy, second only to the United States, has radically re-ordered international trade. Untethered from Brussels, there is no reason why the UK should lose out. Some 60 per cent of the world’s wealth is now generated by emerging markets and newly rich nations, and these are the ripe destinations for exporting our goods, services and brainpower. Considering how the world has changed, the UK’s break with the EU does not mean abandoning the Continent, but drawing it into Britain’s dynamic global aura. Globalisation received a bad rap in the period since the financial crisis and is widely blamed for fuelling the rise of nationalist and populist politicians, including Donald Trump in the US, in the face of it. It is also seen as driving political dissatisfaction in the UK, which gave succour to Nigel Farage’s UK Independence Party, which subsequently transmogrified into the Brexit Party. But the success of the Brexit cause in the North of England and other left-behind parts of the country was due far more to deindustrialisation, income inequality and the exclusion of the white working class from prosperity, which may have fostered an isolationist ‘Little England’ mentality. There is a perfectly logical alternative: create an economic system that meets more of our needs. With the right training, reskilling, apprenticeships and infrastructural investment, the UK’s creative genius can 18

LAND OF HOPE AND ENTERPRISE be leveraged to generate opportunities for those who currently feel left out of society. The City of London has many critics. There is still bitterness that many of those who brought about the financial crisis catastrophe escaped enforcement action and justice. They have prospered while much of the rest of the country faced a squeeze on household incomes and public services. There is little evidence that the lessons of the crisis have been fully learned, or that the bloated bonus culture has been expunged. Similarly, firms and the traders within them have never fully come to terms with issues of sexism and diversity. However, the Square Mile is a huge resource for the UK. The City is the world’s leading generator of financial services exports in the world, totalling £61.9 billion in 2019 compared to the £47.3 billion earned by its biggest rival, the United States.8 The City is among the main reasons why Britain has carved out such a significant role in finance in Europe and across the world. It is the main factor, for instance, behind our big trade surpluses with our single largest trading partner, the United States, but to think of the UK’s strengths as just resting on financial services is far too narrow a view. Britain is the home of Harry Potter, the videogaming industry, television production and internationally renowned theatre and music. These creative artists and firms, along with design and architecture, collectively contribute as much as 10 per cent to our total wealth. UK creativity is treasured, respected and admired way beyond the Continent. The UK also is a leader in medical research and pharmaceuticals, financial technology (fintech), artificial intelligence, software, cyber security and avionics. All of these sectors have huge competitive advantages which, with imagination, vision and optimism, can be the nation’s future. Facing out into the world means changing the way we think about the Anglo-Saxon economic model. Giving weight to the national interest requires the UK government to think and act differently. Industrial strategy and intervention in free markets became unfashionable when Thatcherism and Reaganomics became the guiding 19

THE GREAT BRITISH REB OOT light of the Anglo-Saxon model in the 1980s. But the vision of Ayn Rand, author of the 1957 Atlas Shrugged and an apostle of unfettered capitalism, has passed its peak. The financial crisis of 2007–09, the subsequent ‘Great Recession’ and the 2010 crisis in the eurozone created an opportunity for fresh thinking. The short-termism that encouraged quick returns and hang the consequences needs to make way for a longer-term vision of where commerce and the economy is going. Digital disruption is rapidly changing the way that traditional services are accessed. The online transport app Uber, hospitality provider Airbnb and food delivery firms such as the UK’s Just Eat, are revolutionising the way that business is done. Traditional outlets on the high street, from banks to estate agents, are having to adapt or die. The march of autonomous driving vehicles and robotics is reshaping the way people work. The innovative robotic warehouses, algorithms and logistics of UK online grocer Ocado are conquering the world. The UK is developing systems and building state-ofthe-art autonomous warehouses from France to North America. Corporations need to rethink their self-image. The age when all that mattered was shareholder interests has passed. A much broader definition of corporate governance is required, one that recognises a more expansive definition of stakeholder. The workforce, suppliers, consumers, the national citizen interest, R&D, and sensitivity to climate and other green issues are all part of what companies stand for. The financialisation of economies where enterprises are sold to the highest bidder, whatever the source of the capital and wherever it comes from, needs to change. In recent times we have seen Anglo-Dutch Unilever and the Dutch firm AzkoNobel (owner of Britain’s Dulux paint brand) take on overseas predators and defeat them by redefining the way that shareholders think about assets and their contribution to society. AzkoNobel’s line of defence represents the very change of perspective needed to be adopted across business, government and investment nationally. A Dutch multinational, AzkoNobel acquired 20

LAND OF HOPE AND ENTERPRISE (British) ICI in 2008. It cast off surplus enterprises and focused on the core Dulux brand, defending itself by bringing other stakeholders, including the workforce, on board. It has maintained its investment in Britain through thick and thin, opening a new £100 million R&D and innovation campus in the North East in 2019. Britain’s decision to leave the EU had no impact on its decision, which was made for the long term. Those in favour of defending the national interest are accused of protectionism, but they are not one and the same. It is has to be said that UK operators of rail franchises have been poor in running trains on time when compared to their overseas counterparts – there is some evidence that lines operated by Germany’s Deutsche Bahn, such as Chiltern and Cross Country, are among the most reliable in the country – and UK-owned telecoms operator BT is responsible for the hopelessly slow rollout of broadband to rural areas and ultra-fast broadband in cities. There is little point in putting up barriers to overseas takeovers if they simply preserve companies that have no particular strategic or long-term value. There is, however, a case for nurturing industries and companies that have developed as a result of taxpayer investment in education, universities and R&D. The British experience thus far suggests that care needs to be taken before allowing vital infrastructure to fall into overseas hands. It is not so much the ownership that has been responsible for disappointment and failure, but the regulation. Indeed, overseas ownership might have been less of a problem if the economic regulators who police airports, railways, energy, telecoms and water had been more robust in enforcing best standards, used the power to punish and fine more frequently, and been more forceful in requiring their charges to invest rather than distribute income to overseas owners. As we embark on a new age of infrastructure improvements designed to boost productivity and level up deprived parts of the country, it is critical that the UK has the kind of oversight and regulation that leaves commercial operators quivering at the knees. 21

THE GREAT BRITISH REB OOT Adapting to global competitiveness means rethinking some of the basic tenets of Anglo-Saxon capitalism, but it has to be done. There is no choice. As a freestanding, globally trading economy we have to be the best in everything we do. The UK requires twenty-first-century infrastructure and investment. Crossrail (the Elizabeth Line), traversing London, was hopelessly delayed because of complex software issues that could impinge on safety. HS2, the high-speed line connecting London to Birmingham, Manchester and Leeds has proved to be enormously controversial and expensive. Willpower, better cost controls and less gold plating of projects is required. Cutting loose from the stays of the EU requires that the UK preserves the key advantages we have in science, technology and creativity, and also does everything better. We can’t afford to allow vital investment decisions to be taken in faraway places by people and corporations who have no real stake in the national interest. Much of the thinking and many of the issues highlighted have been picked up in speeches, reports and papers by successive governments and in House of Commons hearings. I was among the witnesses who gave evidence during the 2017 review of industrial strategy, drawing on arguments first expounded in Britain for Sale.9 Theresa May’s government set out a blueprint for the UK’s business future in its glossy Industrial Strategy report, published in 2017. In her introduction to the report, May said: ‘As we leave the European Union and forge a new path for ourselves, so we will build a Britain fit for the future . . . to make the United Kingdom a country that works for everyone.’10 Subsequent events meant that much of what May wanted to do never saw the light of day. Buffeted by the shifting sands of the parliamentary debate on Brexit, May held a snap election in June 2017 and lost the Conservative’s overall majority in the Commons. Amid parliamentary chaos and frequent trips to Brussels and other European capitals, her domestic agenda, including the industrial strategy, was stymied. In any case, it was far too modest in its ambitions for a country setting out on a new path. The political follow-through was timid to non-existent and, as this book will 22

LAND OF HOPE AND ENTERPRISE show, the government has been flaccid in its response to transactions that threatened the UK’s competitive edge. It is to my huge frustration that political weakness and a lack of strategic thinking means that little has changed since the EU referendum. The understanding of what is in the broader public interest has never fully taken root in the national psyche, nor in debates sterile of new ideas. However, much faith is being put in the determination of the government of Boris Johnson, equipped with a handsome majority, to turn the tide. His government, too, faces formidable and potentially diversionary political problems, ranging from holding the Union together to negotiating the wide-ranging trade deals that the UK needs as it seeks to recapture its global outlook. It must also face off against the traditional voices of fiscal conservatism which dominate thinking in the Treasury and across parts of Whitehall, and conversely the extraordinary adoption of some of the most expansionary fiscal policies in peacetime taken by the reforming Chancellor of the Exchequer Rishi Sunak in the face of Covid-19, including the guarantee to pay 80 per cent of the wages of permanent employees (since expanded to include the self-employed) unable to work or put on furlough because of the deadly virus. Sunak’s forecast of public borrowing of 2.4 per cent of GDP in 2020–21 made in his first budget on 11 March 2020, delivered just as the virus was sweeping across Britain, swelled to 15 per cent of GDP as the full consequences of the pandemic took hold. It illustrates that when faced with an unparalleled environment all conventional thinking and inhibitions about budget deficits and the nation debts could be swept aside. Coping with coronavirus and building a new future for the country will not come cheaply. Older government accounting conventions, fiscal rules and monetary policies will need to be rethought in the round. Brexit makes it ever more important that the UK has a better sense of its worth, where it is travelling, its essential strengths and how to bolster and build upon them for a faster growing, more equal society. The elites, mainstream economists and businesses 23

THE GREAT BRITISH REB OOT have done a poor job in selling the UK to the world. Instead of vision, there has been a constant drumbeat of negativism about the prospect for the UK outside of the EU. Government and opinion formers must unleash passion about Britain’s future and inspire ordinary people in the reopened post-lockdown cafes, pubs and public spaces across the land. There is a need to inspire everyone with a greater optimism about what the future could hold if the right can-do attitudes are embraced. My experience as an economic writer tells me that the UK’s new status of looking outwards to the world requires a reawakening. That does not mean turning in on itself, but requires the UK to make its own decisions about policy and not be swept away on the EU tide. It is imperative that the UK retains its status as an open trading nation, preserving and building its edge. This requires new thinking in government about what is in the best interest of citizens. Is it wise to allow our best technology created by UK-trained scientists and engineers to escape overseas when it can be nurtured by us? What should we be doing about reskilling our workforce to create a more autonomous, disruptive economy? How does it address longstanding social inequalities and homelessness? Will the incentives to invest in new infrastructure be more advantageous under UK command and control rather than allowing decisions to be made in overseas capitals? What are the regulatory mechanisms and tests we need to make to ensure this happens? How do we rebuild confidence in governance at Westminster and in the boardrooms? Most importantly, how do we inspire a new generation to reboot and embrace new thinking about what is in the national interest? Unfortunately it will not be as simple as turning the public laptop or mobile device on and off. Every citizen, not just the politicians and the elites, needs to be involved as the country resets the national compass. Instead of the endless focus on the negatives, there must be recognition that so much of what the country does is excellent, innovative and exciting, but in the grudging language of 24

LAND OF HOPE AND ENTERPRISE a school report there is still much room for improvement. The first step in this journey is to better understand the fast-changing shape of the global economy and to recognise the impact of the most recent and possible future pandemics on society. Andrew Hilton of the City think-tank the Centre for the Study of Financial Innovation argues for a switch from a ‘Just-in-Time’ economic model – where the goal is efficiency – to a ‘Just-in-Case’ approach.11 In this blueprint, more resilience is built into economic systems so they are better capable of withstanding shocks. As Britain looks forwards to a post-pandemic and Leave future, the EU will still be a vitally important trade bloc for the UK. The United States will continue to constitute Britain’s biggest single trading partner. However, the locus of activity is shifting dramatically to the Indian Subcontinent, China, the broader Pacific region, Latin America and Africa. Citizens, business, government and the community at large has to reach out to the brave new world, which is examined in the next chapter.




Globalization is not something we can hold off or turn off . . . it is the economic equivalent of a force of nature – like wind or water. Bill Clinton Ninety years ago, a dystopian novel foresaw a future Britain where economic chaos caused a radical reaction that brought about the creation of an international scientific empire. Aldous Huxley wrote Brave New World after the upheaval of the First World War and before the terrors of the Second World War. Britain officially was at peace at the time, but Huxley captured what he sensed were deepseated changes in the national feeling, along with the questioning of long-held social and moral assumptions. In short, he contemplated a revolutionary change. Many factors shaped the outcome of the EU membership referendum in Britain in June 2016, and one suspects the country will be debating them for generations to come. The losing Remain campaign comforts itself with the idea that victory was attained by lies and that no one voted for the degree of political disarray and economic disruption that followed. That was as nothing compared to the economic shockwave delivered by the coronavirus, which caused an unprecedented loss of output – from the month before lockdown to April 2020 when most of the economy was shut, total output plunged by 25 per cent – and threatened the highest level of unemployment in a century. In comparison, observed Ruth Gregory, senior UK economist at City analysts Capital Economics, ‘our expectation of a 1 per cent hit to gross domestic product 26

BRAVE NEW WORLD resulting from Brexit is minuscule’.1 There is truth in the Remain view that Leave exaggerated the benefits of departing from the EU. But there is also truth in the ‘Brexiteer’ claims that once out of the EU, the UK will be able to reallocate funds otherwise paid to the EU for new purposes, not just the NHS. It was also true that, far from being a blessed economic construct, the EU and the seventeen members of the eurozone were not in the best of shape long before the coronavirus added to the dislocation. Membership of the euro had already delivered economic chaos, hardship and political turmoil in Greece, where national output had fallen by one-third and household incomes had been slashed. There has been almost permanent recession in Italy, and the performance of France has been desperately disappointing – fomenting the rise of the dissident gilets jaunes movement for economic justice in 2018–19. Only Germany and a handful of neighbouring northern European countries could point to economic progress, although Berlin suffered a political backlash, mainly against immigration, from the rise of the populist AfD. Brexit was, in effect, a vote against deep-seated changes to the world order. Globalisation had empowered poorer countries and had helped drive China into a position of global economic leadership, where it rivalled the United States. The World Bank estimated that more than 500 million people were lifted out of extreme poverty as China’s poverty rate fell from 88 per cent in 1981 to 6.5 per cent in 2012.2 China’s reputation and image took a global battering in 2020 when it took flak from Western political competitors over its slow disclosure of the health emergency caused by the Covid-19 pandemic in the city of Wuhan. Changes in the shape of the international economy were paralleled by imbalances of democracy and sovereignty, leading citizens to lament a loss of control over their personal and national identities. Traditional industrial communities, from the American Rust Belt to the UK’s manufacturing North, were relegated from the league of prosperity and rising incomes. 27

THE GREAT BRITISH REB OOT The migration of populations from the poorer south of Europe to the north together with strategic turmoil in the Middle East and North Africa created an influx of immigration into the UK, which was seen in many communities as a threat to the existing social order. Populist parties, such as the UK Independence Party (UKIP) in Britain, found in the campaign to leave Europe a cause with which the economically dispossessed could identify. What happened in the UK was not isolated. Many of the same factors lifted Donald Trump into the White House in the US in 2016, and led to the rise of the new right on Europe’s eastern flank. It also saw the establishment of a nationalist, populist government in Italy in June 2018, made up of Matteo Salvini’s traditionally conservative Lega Nord and the newly minted Five Star Movement. As a journalist who favoured Britain leaving the EU, I would like to think that my columns in the Daily Mail, which made the case for Brexit on economic grounds, were a critical part of the decision-making, but I fear it was concern about the impact of immigration on everyday lives, and the idea that the EU was squeezing the nation’s sovereignty and making the UK’s own governance less representative and relevant, that really won the day. However, I passionately believe that the economic and financial arguments that I and others made in favour of departing the EU were correct, and a changing brave new world required a different approach. The swing in economic power from the older, richer industrial economies to the Pacific, Latin America and other newly rich countries meant that the EU had become a straitjacket. The UK, with its free and open markets and big financial sector, would increasingly be constrained by being part of an inwardly focused trading bloc, expert at erecting non-tariff barriers to trade. The fightback by the EU competition authorities against the US digital giants is a case in point. In 2015, a £11.4 billion penalty was imposed on Apple for receiving illegal tax benefits. The EU also introduced the General Data Protection Regulation (GDPR) in 28

BRAVE NEW WORLD May 2018 to underpin the protection and privacy of users of online sites. Although this regulation and other policies may have been justified and popular, taken together, these were, in effect, non-tariff barriers designed to curtail the global ambitions of the Silicon Valley behemoths. The political and economic challenges of going global are considerable. As part of the EU, the UK has been the beneficiary of Brusselsnegotiated trade arrangements. It has enjoyed low-tariff trade with twenty-seven EU states, as well as the benefit of third-party trading agreements negotiated with Canada, Norway and others. Outside the EU, the UK will have to forge its own trade deals. It will mean steering a course between the world’s two largest economies, the US and China. In the years between 2017 and 2020, with Donald Trump in the White House, the US fought a stressful trade war with China which dramatically slowed the growth of international trade. In the first half of 2019, the UK’s last year as a member of the EU, the IMF estimated ‘the volume of global trade stood just 1 per cent above its value one year ago – the slowest pace of growth for any six-month period since 2012’.3 The standoff between the US and China on trade and technology transfers was part of a broader strategic jostling for hegemony by two great powers, brilliantly described by Harvard political scientist Graham Allison,4 and heightened in 2020 by tensions created by the pandemic and Beijing’s tightening of the security noose around Hong Kong. The speed of change in economics and finance has been breathtaking. The interconnections of the global economy were brought into sharp focus in 2020 by the rapid spread of Covid-19 and its devastating impact on output, first in China and the Pacific where it began, then in Western Europe, North America and much of the developing world. The immediate interruption to international growth was faster, far deeper and more disruptive than during the financial crisis. The Paris-based Organisation for Economic Co-operation and Development (OECD) forecast in June 2020 that the coronavirus-inflicted recession would be the biggest 29

THE GREAT BRITISH REB OOT peacetime downturn in a century with global output plummeting by 6 per cent in 2020. If there were a second wave of infection the outcome would be even worse, with production shrinking by 7.8 per cent.5 This in spite of the fact that the UK, the United States, Japan and Germany together with other Western countries took radical steps to stabilise their financial systems and economies on a scale not seen before in peacetime. In 2018–19, even as Britain was enveloped in uncertainty about its future relationship with the EU, a critical bridge was crossed in the City of London when trade in the Chinese currency, the renminbi, exceeded that in euro-denominated assets. The efforts by Britain to court China as a financial services client has paid dividends. In early 2020, the hard reality of navigating trade relations between China and the US was demonstrated as the newly elected government of Boris Johnson gave the green light for the Chinese telecoms company, Huawei, to take part in the buildout of the UK’s 5G mobile telecoms network. To assuage American national security concerns, the UK restricted Huawei to work on non-sensitive parts of the network, up to a maximum of 35 per cent of the overall contract value. The telecoms decision, taken in the face of publicly voiced US opposition, provided an early warning of the strategic obstacles to more global trading relations. Much of the economic debate around the disturbance to the British economy caused by Brexit focused on goods industries, notably motor cars and aerospace. The revival of British motor manufacturing, most of it under overseas ownership and management in the 1990s and since, had been miraculous until the coronavirus slashed new car registrations to virtually nothing in the spring of 2020. The pre-coronavirus revival of the car industry was, without doubt, a consequence of the UK being a bridgehead into the EU. As an island nation, Japanese investors were drawn to the UK and brought with them the concept of ‘just-in-time’ production – components being offloaded directly from ships, containers and trucks and moved almost immediately to the production lines. 30

BRAVE NEW WORLD When business investment slumped in 2018–19, several manufacturers, including Nissan and then Honda in February 2019, revealed they would be reshoring some, if not all, production to Japan. This was seen in some quarters as a devastating blow to Brexit, but in reality the critical factors were the climate change agenda, technological advancement and the drive towards electric vehicles (EVs). Onerous restrictions placed on high-emission diesel cars and targets to eliminate petrol and hybrid cars by 2035 were also playing a part in reshaping the global motor industry. Nevertheless, making cars in Britain has helped to restore the nation’s confidence as a manufacturing economy, and has brought jobs back to the industrial North. A diversified economy is plainly critical for a UK outside the EU and, ideally, the UK’s technological heft should give it advantages in the new green world of EVs. The dominant feature of the UK’s domestic and global economy is the strength of its services sector, which pre-Covid-19 generated trade surpluses of up to £90 billion a year. The shining international outlook for services barely featured in the Brexit debate, yet the trade in services governed by supranational rather than pedantic EU rules will be immensely beneficial to the UK. ‘Free trade in services can help resolve external imbalances,’ the then governor of the Bank of England, Mark Carney, argued during a landmark speech in February 2019: ‘With barriers to services trade currently up to three times higher than those for goods, the Bank estimates that eliminating this differential could reduce the excess deficits . . . of the UK by up to one half.’6 For the UK, membership of the world’s largest trading bloc of 500 million people clearly has been a big advantage. But the EU is curiously inward-looking, and some regulations and directives imposed by the Brussels bureaucracy are more inclined to encumber trade and investment rather than nurture it. Among the rules that diverged from those in the UK was the Working Time Directive, introduced into UK law as the Working Time Regulations (1988), which was seen by some businesses as rolling back hard won, flexible labour market reforms. 31

THE GREAT BRITISH REB OOT Whereas the EU made for easy commercial choices for much of corporate Britain, which needed to look no further than across the North Sea for business, global companies in the UK from Diageo to Rolls-Royce had already discovered a new reality. Emerging markets and newly rich nations accounted for 57 per cent of global trade at the time of the referendum, which was outpacing most of Europe’s advanced nations. In the wake of the 2016 EU referendum result, the UK faces another kind of brave new world that will require a revolution, especially a revolution in thinking. Among the things bedevilling the UK and its policymaking has been the almost static thinking among our leaders about the far-reaching changes in the global condition and the detrimental impact on the ordinary citizen of the UK’s membership of the EU. Our commitment to the European ideal has narrowed the UK’s focus. In the best traditions of Her Majesty’s Civil Service, the UK has fulfilled its obligations under EU treaties in a laserlike manner, suppressing its independence of action. Much of what Parliament decided, including the distribution of the UK’s eye-popping overseas development budget of 0.7 per cent of GDP, worth some £14 billion a year, has been focused upon through the Brussels lens. An example of such rule-taking includes UK government contracts for items such as rolling stock for the railways being conducted on an EU-wide competition basis, often leaving domestic manufacturers in the sidings. The future for the UK lies in harnessing our talents as a global-facing nation, embracing a world of fast-moving technologies and changing markets. The scale of change was outlined by World Bank economist Shantayanan Devarajan in a conversation at his office in downtown Washington DC, a stone’s throw from the White House: There have been profound changes. First just in terms of the availability of low-cost manufactured goods and the effects that has had on other countries. Then the Chinese demand for 32

BRAVE NEW WORLD commodities. It’s not accidental that we went into a commodity super cycle at that time as the increase in the size of the Chinese economy made it the second largest in the world. Previously you had the US, Europe and Japan. Now you basically have the US and China with the others relegated to third and fourth place.7

To understand where the UK needs to travel as a nation, we must look at where we have come from. The roots of where Britain has found itself in recent times are to be found in the politics of the post-war years. Europe saw two catastrophic wars in the twentieth century, before the continent’s leaders came together in a bid to stop such conflicts from ever happening again. It began in 1952 with economic arrangements in the form of the European Coal and Steel Community, which grew into the wider Common Market, which then became more political as it morphed into its much larger heirs, the European Community (EC) and then the EU. The UK initially had held back from the European project, but was rebuffed throughout the 1960s when repeated efforts to join were made. These attempts had been fairly disastrous – most notably, Prime Minister Harold Macmillan’s 1963 discussions with French President Charles de Gaulle when the latter said ‘non’ and proceeded to block our application. However, the UK eventually got on board in 1973 when the community enlarged for the first time; the atmosphere had improved when Georges Pompidou took over from the aloof de Gaulle and he made it clear that France would be interested in negotiating terms for the UK’s entry. Two years of negotiations followed, and in 1972, Prime Minister Ted Heath went to Paris to conclude the final agreement. Former British diplomat Sir Crispin Tickell considered Heath’s motives thus: ‘Ever since the rebuffs in the 60s, he had felt it was his duty to get this right and saw it as his crowning achievement.’8 Critics of the EU as it currently is set up insist that there has been overreach and the community, which 75 per cent of the British 33

THE GREAT BRITISH REB OOT people voted to join in 1975, has evolved into something very different. The former Common Market morphed from a customs union to a single market before moving towards a political union. Indeed, in 2018, as Britain was still negotiating the terms of Brexit, President of France Emmanuel Macron and Chancellor of Germany Angela Merkel signed a new treaty at the border town of Aachen, near the residence of Charlemagne, the king who united much of Europe during the early Middle Ages. The sixteen-page document pledged closer cooperation between the continent’s two biggest nations on defence and foreign policy, as well as closer economic cooperation. It declared: ‘Our common ambition must be that Europe shields our people from the tumults of the world. Because we love Europe, we have decided to continue to build it with focus and determination.’9 The accord underlined the direction of travel for France and Germany, and for the EU as a whole. It was criticised in Germany for failing to go far enough in cementing ties and for its lack of granular detail on how to move the process on. It was also greeted with scepticism. Two weakened leaders, Macron by the gilets jaunes and Merkel by the AfD (and her lame duck status, having committed to step down as Chancellor in 2021), were seen as seeking to rebuild reputations. The EU’s response to Covid-19 again demonstrated the fractious and slow economy decision-making. In the early days of the crisis it was a case of every country for itself as they sought to gain access to essential supplies such as personal protection equipment (PPE). Britain, the United States, Japan and Germany moved to unveil big fiscal stimulus packages designed to ease long-term damage to their economies. In the EU it was left to the European Central Bank under the command of former IMF managing director Christine Lagarde to take bold policy action and on 12 March 2020 it launched a €750 billion bond buying programme for countries that use the euro. Amid fears of what Lagarde described as an ‘unprecedented contraction’ it added €600 billion to its monetary stimulus on 4 June 2020.10 34

BRAVE NEW WORLD The European Commission struggled to come up with an agreed fiscal package. On 27 May 2020 it unveiled a mixed near €700 billion rescue designed to support the struggling nations in the bloc.11 The proposals were hailed in some quarters as a breakthrough moment for the EU because they included raising some of the funds through jointly issued EU bonds. This was seen as a sharing of risk never before undertaken by the EU. Immediately, objections were raised by the so called ‘frugal four’ – Austria, Denmark, Germany and the Netherlands – that resented the ideas of bail-outs for countries that successive crises had failed to bring their budgets under control. As Europe dithered other nations, including the UK, pressed on with their own fiscal remedies. Rather than demonstrating unity within the EU the pandemic exposed fractious, grudging and laggard decision-making. As Covid-19 dominated, the UK travelled inexorably towards exit from the EU. For those who need reminding, in the June 2016 referendum the British public voted by a 52 to 48 per cent majority to leave the EU. The departure date was set for 29 March 2019, but after three-and-a-half years of debate the UK officially left the EU on 31 January 2020. This opened the way for resetting trade relations with Brussels and the forging of new free trade agreements with third countries against the turbulent backdrop of the coronavirus catastrophe. The UK’s commitment to the European ideal and keeping the peace among nations, which was held well into the second decade of the twenty-first century, was understandable. Transcending all else, the avoidance of a conflict among the major European powers was seen by supporters of the EU as the overarching reason for continued membership. In making the strategic case for involvement, reference was rarely made to the ugly civil war and genocide that took place on European soil in 1991–92, when the former Yugoslavia broke into six different countries. Furthermore, EU backers preferred to airbrush the inaction and lack of determination of Brussels in dealing with challenges to democracy, the 35

THE GREAT BRITISH REB OOT judiciary and freedom of the press in some of the Eastern European accession states. The UK has long been in two minds about the EU project. The main concerns have been about the increasingly political direction of the Union and the way that impinges on the UK’s sovereignty. UK policymakers deeply involved in Brussels decision-making find British half-heartedness a matter of regret. ‘It was sad,’ reflects former senior UK diplomat, Sir Crispin Tickell, ‘that in later negotiations we were always one of the more reluctant countries. We never gave proper leadership. We spent our time arguing about details, and were grudging members when we could have been leading members.’12 The gains from our EU membership over the past forty or so years have been closely debated. Most economists argue that Britain benefited greatly. The Bank of England’s deputy governor, Ben Broadbent, a former chief economist at Goldman Sachs, is among those who argue that trade theory shows that the most natural partners are the nearest neighbours: ‘Put simply, a significant curtailment of trade with Europe would force the UK to shift away from producing the things it’s been relatively good at, and therefore tends to export to the EU, and towards the things it currently imports and is relatively less good at.’13 The UK’s greater openness to global markets is also seen as giving the UK the best of both worlds. The nation has benefited from having the EU with its market of 500 million people on its doorstep. The global outlook from within the EU has also fostered greater dynamism, along with gains from trade, foreign investment, competition and innovation. The UK’s original motives for joining the EEC were decidedly mixed. After 1945, Britain accelerated the retreat from empire and began to yearn for a more realistic role at the heart of Europe. As the UK started to rethink its future, it was forced to confront its past in the shape of unreformed industries, over-powerful trade unions, and larger welfare and defence commitments than it could 36

BRAVE NEW WORLD really afford. A series of devaluations of the pound against the dollar and other trading currencies gave the impression of a country on its knees. The EEC nations came to regard Britain as the ‘sick man of Europe’ with a troubled economy. Conventional wisdom has it that Britain wanted to sign up because it saw the EEC engine as a means of revitalising the country’s economic prospects. By the late 1960s, France, West Germany and Italy – the three founder members closest in size to the UK – produced more per person than the UK did, and the gap grew larger every year.14 Many observers contend that the UK slowly caught up after joining the EEC. The single European market, they claim, increased competition and forced British firms to improve innovation, so that by 2013 the UK reportedly became more prosperous than the average of the three other large European economies for the first time since 1965.15 A counterargument is that UK growth rates matched those of European rivals in the 1960s; in addition, they say that the EU was in no position to aid anyone’s economy, spending most of its meagre resources on agriculture and fisheries, and had no policies at all for furthering economic growth. Any European growth after 1945 was kickstarted by the West German currency and supply-side reforms from 1948 onwards, and by France in the 1960s. In my view, the biggest drivers of the British recovery and growth in the 1980s and beyond were the dramatic reforms to the UK’s labour laws, capital markets, fiscal policy and industry engineered by Margaret Thatcher. Her years as prime minister, from 1979 to 1990, saw the greatest transformation of the British economy since the Second World War. What is easily forgotten is that many of the changes ran counter to the statist approach of what was to become the EU. The end of the UK’s exchange control regime, together with the ‘Big Bang’ abolition of restrictive practices in the City of London, ushered in a renaissance for British finance that saw the Square Mile transformed into Europe’s financial capital and a magnet for big US investment banks. Financial services became a centre of excellence 37

THE GREAT BRITISH REB OOT for the UK economy, generating billions in balance of payments in the service industries and creating jobs and investment. A new City, Canary Wharf, was engineered out of the Docklands wasteland. Elsewhere, Thatcher’s battle with the coal mining unions proved to be the decisive fight against trades union power in Britain, which had contributed so much to the great inflation rates of the 1970s and early 1980s. By the time Thatcher left office, the UK had the most flexible labour laws in Europe, and the benefits of those reforms are still evident. UK employment levels bounced back from the Great Recession of 2009–10 far faster than those of most of its European partners, with the exception of Germany. In 2020, more than a decade after the financial crisis, the UK’s unemployment rate of 3.8 per cent of the workforce was half what it was across the eurozone countries. Covid-19 dramatically changed that. Lockdown resulted in 9 million workers being placed on furlough in the UK and on the state payroll. Furlough temporarily protected the workforce from the surging unemployment in the United States and other advanced economies. But the UK’s stellar record in reducing joblessness since the financial crisis, particularly among young adults, would be brought to a shuddering halt by the pandemic. The UK’s flexible labour market, the ability to hire and fire, is among the factors that made it the most attractive venue in Europe for foreign investment. On the fiscal front, the efforts of successive chancellors of the Exchequer in the 1980s, Geoffrey Howe and Nigel Lawson, cut the top rates of tax on the wealthy, which led to the return to the UK of tax exiles and the unleashing of a new era of investment and entrepreneurship. Privatisation released the public utilities from the dead hand of the state and lifted investment and competition. Europe lagged behind in all these areas. The longer-term impact was to be seen in the decade following the financial crisis when Europe struggled to repair its financial system, and unemployment levels, especially among young people, remained unconscionably high. The contrast 38

BRAVE NEW WORLD between Europe’s monetary and fiscal orthodoxy and its inability to adapt versus the UK’s more flexible, free market capitalism could not have been greater. In my view, it is the Thatcher supply-side revolution, for all of its distributional flaws, which unleashed a new age of prosperity in the UK. Professor Nauro Campos of Brunel University attempted to calculate how the UK would have fared in or out of the EEC.16 His best approximation of its pre-1973 performance was a combination of New Zealand and Argentina. Over the next forty years, the UK economy outperformed those two countries by 23 per cent. Prosperity increased sharply during two periods – in the 1970s soon after we joined the Community, and in 1992 following the opening of the EU single market in goods – but neither event should be viewed in isolation. The UK in the 1970s benefited from devaluations of the pound in 1967 and 1976, making the UK’s goods and services more competitive overseas. Similarly, the creation of the single market coincided with the Thatcher reforms, which included a more flexible exchange rate regime and flexible labour laws. The reforms slowly brought an end to the flood of industrial disputes and encouraged companies to commit to modernisation and new investment. In the same period, the EU grew into a market of 500 million people among its twenty-eight members, becoming at one point the world’s largest trading bloc. In 2016, the pro-Remain Institute for New Economic Thinking claimed that, since joining the EU, the UK’s growth had exceeded that of the US, despite the international economic crisis of 2008 which, far from dragging down UK per capita growth, remained at a robust 2.1 per cent. As the UK economy grew, trade became more important; since 1973, the ratio of trade to economic output increased from 48 per cent to 67 per cent. By way of contrast, Brexit voices claimed that the UK actually gained very little from the EU. James Bartholomew, journalist and future Brexit Party candidate in the 2019 European Parliament election, argued: 39

THE GREAT BRITISH REB OOT Over the past decade there has been a tenfold increase in the volume of EU laws imposed on financial services. More and more activities are coming under the control of majority voting and one of our remaining successful industries is in danger. A revolution is taking place whereby largely British control of financial services is increasingly being replaced with EU regulations . . . It is curious that the damage done to Britain by the European Union is not widely recognised.17

The reality is that much EU legislation in financial services originated in London where there is a far greater knowledge base. The UK’s success in dominating European financial services created tensions with Paris, Frankfurt and other centres that resented the UK’s leadership. The eurozone crisis of 2010 was the spark that led the seventeen eurozone countries to create their own regulatory infrastructure. As a non-member of the eurozone, the UK was excluded from these efforts, in spite of the City’s prominence. The clash of interests was demonstrated in 2013 when the EU sought to cap bonuses paid by European banks to their executives. Under the proposed rules, bonuses for bankers would be capped at 100 per cent of their base salaries, and a shareholder vote would be required to wave through a 200 per cent increase. The UK opposed this on the grounds that it distorted the marketplace by raising base salaries and, therefore, the fixed costs of banks. It also meant that London-based banks might be unable to compete with Wall Street in attracting the best and brightest, and as a consequence, the competitiveness of the City would suffer. Then Chancellor George Osborne (a strong supporter of Remain) saw the EU move as ‘meddling’. In a statement the HM Treasury noted: ‘These latest EU rules on bonuses, rushed through without any assessment of their impact, will undermine [global reforms to banking] by pushing bankers’ fixed pay up rather than down, which will make banks themselves riskier rather than safer.’18 40

BRAVE NEW WORLD A year later, Osborne withdrew the government’s challenge, which was brought before the European Court of Justice (ECJ) after an adviser to the Court rejected the UK’s arguments. Osborne and the Treasury also launched legal complaints against a proposed financial transactions tax and an attempt to give EU regulators the powers to outlaw short selling. All of these EU actions demonstrated a prejudice against the Anglo-Saxon model of capitalism. In effect, the EU was rebelling against the supranational rules governing finance inaugurated by the Financial Stability Board, chaired by then Bank of England Governor Mark Carney. The row over EU efforts to set their own financial rules illustrated that, even with a seat at the table, the UK found itself ineffectual when seeking to make changes to EU regulations that had an impact on the most valuable sector of the UK economy. The blockages were partly a result of the EU’s distrust of institutional arrangements made after the financial crisis, which brought new powerful economies, including China, India and Brazil, to the top table as part of what became known as the G20.19 The empowerment of the G20 as the main policy-setting panel for the global economy and finance meant that decision-making would no longer be dominated by the older Western nations. The creation of the G20, an initiative pioneered by former British Prime Minister Gordon Brown, was an institutional response to deepseated changes in the global order. Some eurosceptic economists believe that Britain did not enjoy the superior growth claimed as a result of EU membership. They point out that the EU’s share of world trade shrank with the 2008 global financial crisis, which hit Europe particularly hard. Analysts in this camp believe that the UK stands a better chance of growth if it looks beyond what they see as the sluggish, tired economies of EU members. The spectrum of views on the economic consequences of Brexit is vast. In its sober 2018 assessment of the British economy, the Washington-based IMF forecast that a reversion by the UK to a 41

THE GREAT BRITISH REB OOT tariff regime policed by the World Trade Organization (WTO) would lead to output losses of between 5 and 8 per cent in the long run (defined as a decade); but, more optimistically, it observed that an agreement featuring few impediments to trade could ‘buoy confidence, activity, and asset prices. New trade arrangements with countries outside the EU could offset some of the losses on trade with the EU over the long run.’20 The Economists for Brexit group (later renamed the Economists for Free Trade), led by Thatcherite favourite Professor Patrick Minford of Cardiff Business School, consistently disputed the negative view of more mainstream economic analysts, including the IMF, the World Bank and the UK Treasury itself. In the period between the 2016 referendum and 29 March 2019, Minford and his group were proved largely correct: the recession predicted by Remainers never arrived, unemployment in the UK fell to its lowest level in forty years and the job-creation machine flourished. The big disappointment was business investment, which stuttered in the face of uncertainty. Minford has consistently stated that if the UK left the EU without a trade deal and unilaterally dropped all tariff barriers on imports – what he terms ‘unilateral trade disarmament’ – the country’s GDP could be boosted by 4 per cent.21 He arrived at that figure by, first, assuming that, freed from EU trade protectionism under his ‘Britain Alone’ scenario, prices paid by UK consumers for manufactured and agricultural goods would fall by 10 per cent; and, second, feeding that decrease in trade costs into his ‘Liverpool model’ of the economy to arrive at a 4 per cent GDP upsurge. In his analysis, freer trade and the absence of EU regulations would benefit the UK to the tune of billions of pounds. The Economists for Free Trade numbers were challenged by Chris Giles in the Financial Times.22 Giles contrasted their findings with a Whitehall analysis which suggested a 2 to 8 per cent fall in national income. Giles argued that the assumptions made by Minford et al. were absurd. In particular, he disparaged an assumption that, after Brexit, the UK would have no tariffs with any 42

BRAVE NEW WORLD country, no non-tariff barriers with any country, and that border costs would be zero. Minford hit back, defending his assumptions and disputing the Civil Service assessment of border costs.23 The disputed forecasts as to the UK’s prospects reflected the bitterness and distortions in the run-up to the referendum and the period that followed. Economics is only as good as the assumptions fed into the models, and as such these can produce wildly different outcomes. The steps taken by business in the interregnum and the behavioural change that followed the UK’s formal departure from the EU on 31 January 2020 were always likely to produce different results. In the light of the catastrophic forecasts for the UK, European and world economy as a result of the coronavirus, the confident Leave forecasts may appear a little academic. Nevertheless, Britain outside the EU does have the advantage of implementing its own fiscal, monetary and trade strategies without recourse to Brussels or Frankfurt. As the Thatcherite reforms to the economy were being implemented in the 1980s, Professor Minford, with his stark monetarist views, was regarded as a maverick, yet he was among the few forecasters to correctly predict a return to faster growth. History may not repeat itself, but removing formal and hidden trade barriers in an increasingly globalised world is the kind of out-of-the-box thinking that few economists have dared to contemplate. Even the IMF, which was highly critical of the impact of Brexit before, during and after the referendum, has been able to come up with a positive trade-led scenario for the future. Events also have a habit of getting in the way of stylised forecasting. The spillover from the hard-line trade policies of the Trump administration have been difficult to model. The green revolution in motor vehicle production, which hit Germany’s car industry and its manufacturing sector in the period between 2018 and 2020, slowed Europe’s locomotive economy. The completely unexpected global coronavirus pandemic demolished global growth in an instant. Nevertheless, these events illustrate the interwoven and 43

THE GREAT BRITISH REB OOT interconnected nature of the international economy, and the opportunities for the UK if it rises to the challenge. Europe has dominated British politics since the 1960s. It has proved hugely divisive for both the Labour and Conservative parties. Indeed, it has been the defining issue in framing Conservative leadership decisions and, ultimately, was what ended Margaret Thatcher’s eleven years as prime minister. Passions about the EU run high among Tory party members, activists, MPs and voters. Conservative governments and prime ministers have repeatedly struggled to deal with dissent on the EU. David Cameron, fearing the rise and ballot-box appeal of the more rightwing UKIP, offered a referendum on continued membership of the EU in his 2015 general election manifesto; a gesture towards the refuseniks, Cameron never expected to have to deliver on his pledge. His hand was forced with the unexpected outcome of that election as the Tories gained a surprise working majority after five years of coalition government with the Lib Dems. The victory was the more remarkable in that it came after five tough years of budget austerity and falling household incomes that tested the patience of a public yearning for a return to better economic times. The deadline date for the referendum was initially set for December 2017, but Cameron, in a fateful miscalculation, decided to go early and announced at the end of February 2016 that the referendum would take place that summer on 23 June. He almost certainly felt he was the leader with the golden touch, commanding a majority in the House of Commons after also emerging victorious from the 2014 Scottish independence referendum. In fact, Cameron was so confident of winning the 2016 referendum vote that he allowed his cabinet members a free vote to support either Remain or Leave. Despite the huge weight of the Whitehall machine, media backing and substantial funding behind Remain, Cameron and his colleagues fought a negative battle – forever remembered as ‘Project Fear’. Among the key predictions were dire economic consequences 44

BRAVE NEW WORLD if the UK voted to leave. In the dying days of the campaign then Chancellor George Osborne appeared alongside his Labour predecessor, Alistair Darling, to warn of the need for an emergency budget to raise £15 billion of new revenues through higher income and wealth taxes. The shock Leave victory saw Cameron resign immediately. Theresa May was selected as Conservative leader, with the legacy of piloting Britain through its EU departure. MPs eventually set a leaving date of 29 March 2019. The economic turmoil predicted never materialised. The immediate shock of the Brexit vote was cushioned by the governor of the Bank of England, Mark Carney. In a rehearsed, televised statement, Carney unveiled a four-point plan to support output and restore confidence. This included an extra £150 billion of quantitative easing – a programme under which the Bank buys government bonds in exchange for cash, effectively injecting that extra money into the economy. The bank rate was cut by a quarter of a percentage point to 0.25 per cent, making it cheaper for consumers and businesses to borrow. The Bank launched an initiative taking the stock of purchased corporate bonds to £20 billion, thus improving the financial climate for business. Finally, it opened a special window within which banks could borrow short-term funds in case, as was the situation before the financial crisis, markets froze over and there was a credit crunch. Carney came under fire during the referendum campaign for appearing to be too friendly to Remainers, arguing, among other things, that the uncertainty surrounding a vote to leave would almost certainly hit business investment. However, the shock of the vote to the markets and business was cushioned by the Bank of England’s intervention, and Carney took credit for the relatively calm financial response. In evidence to the Treasury Select Committee in February 2017, Carney testified that the offer of large-scale liquidity to the financial markets on the morning of 24 June 2016 and a cut in the capital requirements of banks later in 45

THE GREAT BRITISH REB OOT July of the same year had helped the economy avoid a potential financial crunch: In terms of the financial-stability risks around the referendum, the bank did take some serious steps. If we hadn’t done that, there would have been macroeconomic consequences. It’s important we did. We just have to accept we will never get any credit for it.24

Bank research showed that the actions it had taken had saved 250,000 jobs. The much-feared post-referendum economic meltdown never materialised. Growth meandered along with GDP, expanding at 1.8 per cent in 2016, 1.7 per cent in 2017, 1.4 per cent in 2018 and 1.3 per cent in 2019.25 The trend was clearly downwards. Business investment and consumer confidence was suffering, but the remarkable aspect of the UK economy was that the flexible labour market, one of the key legacies of the Thatcher era, meant that the jobs-creation machine was healthy and unemployment remained at remarkably low levels. In January 2020, there were 32.6 million people in work in the UK. The employment rate of 76.3 per cent was the highest on record and the jobless rate of 3.8 per cent of the workforce was the lowest since 1974.26 One consequence of full employment and rising wages has been a boost in tax revenues for the Exchequer, thereby bolstering public finances. The starting point for the UK’s future after leaving the EU is far from hopeless. In many ways, the UK has been overachieving in spite of EU membership rather than because of it – this is due in part to not being part of the single currency. In the one-size-fits-all eurozone, a shared exchange rate and monetary policy together with common fiscal targets was delivering low, if any, growth and high levels of unemployment. Brexit offers the UK an opportunity to benefit from being a part of a very different global economy to that which existed when the UK first entered the Common Market in 1975. 46

BRAVE NEW WORLD The UK’s historic world trading past means that it is no newcomer to globalisation; the era of the empire had created trading opportunities on every continent, from the Indian Subcontinent to Asia, Australasia and the Americas. Joining the Common Market had meant ditching some of those trade relationships and Commonwealth preferences in favour of the EC trading rules that prevailed at that time. Australia is a case in point. Its mineral resources, harvested by great British companies such as Rio Tinto, meant it has enjoyed more than a quarter of a century of uninterrupted growth. The ties of kith and kin between the UK and Australia remain as strong as ever, but the UK could only take limited advantage of this substantial market because of barriers and regulations imposed by an EU terrified of food imports that might undermine continental agricultural production. The rise of the BRICS (Brazil, Russia, India, China and South Africa) economies – growth machines first identified by former Goldman Sachs economist Jim O’Neill at the turn of the twenty-first century – has totally changed the terms of global trade. China has emerged as the second-largest economy in the world. Brazil is bigger than France, Germany and Italy. Each of Brazil, India and Russia is bigger than Canada. Alongside these there are newly rich nations such as South Korea, Singapore, Turkey and Israel, and the rising frontier nations ranging from Vietnam to Peru. Their addition to the world trading system means a greater choice of imports, lower prices and economies of scale in production. One only has to peruse the fruit and vegetable aisles in our supermarkets to recognise how the world has changed. Blueberries are air-freighted from Chile, avocados from Peru, strawberries from Kenya, raspberries from South Africa and dates from the Palestinian territories. In the other direction, Marks & Spencer supplies its franchised stores in Hong Kong with freshly prepared meals and sandwiches flown in by jumbo jet from the UK. The plaid woollen sports jacket I am wearing as I write this was made in Egypt. The cars parked on the road outside my house come from 47

THE GREAT BRITISH REB OOT Korea, Germany, Sweden and the Czech Republic. The HewlettPackard EliteBook on which I am working was shipped directly from China to my desk at work, and so on. If a consumer or a business wants goods and equipment, it does not matter whether the supplier is part of a trading bloc. It may just be a question of paying a slightly different price in what is, at its core, a low-tariff world. Globalisation, air freight, fully computerised container transport systems and advanced logistics have shrunk the world. To be sure, just-in-time manufacturing makes it easier to source car parts for vehicles built in the UK and Europe, but much of the electronics, including the computer chips which now control the driving experience, are designed in Cambridge or Silicon Valley and shipped from the Pacific. Globalisation has also seen the integration of markets, leading to the increased interconnection between national economies, and has brought about a growth in trade and an increase in the movement of labour and capital. Modern markets know few borders and extend well beyond economic blocs such as the EU. Indeed, in the digital world of the FAANG corporations (Facebook, Amazon, Apple, Netflix and Google), services reach all of us through a mobile spectrum and fibre optic cables that ignore borders. Credit card payments, handled by MasterCard and Visa, and new digital payments handlers such as Worldpay, likewise recognise no borders. Developments in information and communications technology (ICT), transport and communications have accelerated the pace of globalisation over the past three decades. The internet has enabled lightning-fast 24/7 global communication and the use of containerisation has enabled vast quantities of goods and commodities to be shipped across the world at extremely low cost. At the UK’s largest container port of Felixstowe, containers holding all manner of goods are marshalled from computerised pods, which look like the control towers that one can see at major airports. The rise of social media means that national boundaries have in many ways become irrelevant as producers use new forms of 48

BRAVE NEW WORLD communication and salesmanship, including micromarketing, which harvests personal data to target individuals or groups of consumers. The widespread use of smartphones has also enabled global shoppers to gain easy access to ‘virtual’ global markets for all manner of services – from accessing movies and music to settling the bill for a holiday let in New England to betting on the 3.45 at Haydock Park racecourse. The emergence of new electronic payments systems, part of the financial (fintech) revolution that includes e-wallets (pre-pay and mobile pay), e-invoices and mobile pay apps, facilitate increased global trade. This has meant that footloose multinational and transnational companies have arrived on the scene, along with the meteoric rise of global brands such as Amazon and Apple. However, globalisation brings its own problems. Increased immigration to the UK has led to social tensions. Arguably, it makes the UK more vulnerable to the global economic cycle – the openness of the UK to international trade and services has always meant that a deep recession or a financial crisis among our main trading partners in the EU or the US will hit the UK hard. Many older industries have died, which has caused social dislocation. They have been replaced by jobs that pay less – such as in the soul-destroying economies of call centres and computerised warehouses. Competition from overseas has led to the creation of a whole layer of zombie companies, which are kept operating by cheap credit and low interest rates. There has also been social disquiet among the young who have protested widely at what they see as even greater inequality. Many enter the workforce burdened with student loan and other debts. Getting onto the housing ladder has become increasingly difficult. The generations that preceded them are seen as having benefited from free or cheaper university education and windfall profits from purchasing properties earlier. They are also seen as having more generous occupational pensions, many of which have vanished from the benefits packages now on offer by most employers. 49

THE GREAT BRITISH REB OOT Globalisation is seen as an ogre in this debate, but most of these social disparities are as much the result of domestic as of international origin. Nevertheless, the sense of dislocation is profound. Intellectually, it found a voice in the French economist Thomas Piketty’s titanic work Capital in the Twenty-First Century, which focuses on wealth and income inequality. There is resentment of perceived tax avoidance by multinationals and billionaires, which is not helped by the Silicon Valley giants who claim to operate in line with rules established by the OECD, who pay minimal taxes when compared to their bricks-and-mortar peers. High-profile billionaires such as the UK’s Jim Ratcliffe, founder of industrial giant INEOS, publicly lent support to Brexit while seeking to arrange his own personal departure to low-tax Monaco. All of this is viewed in stark contrast to the ‘gig economy’, where job security and benefits are fragile and wages have been stuck in low gear. Fault lines in British, US and EU politics have opened up around globalisation. The social impacts are seen as iniquitous, but that is as much about the failure of leaders in the larger Western economies to adjust domestic policy to a new era. That is why the ideas of politicians with socialist ideas, such as former Labour leader Jeremy Corbyn in Britain and Bernie Sanders and Elizabeth Warren in the United States, found traction among the young. Yet it is the opportunities offered by global markets for goods, and increasingly for services, that will deliver the better living standards and improved social settlement the young crave. There is a view that the world may have reached peak globalisation – because of the inequality it has driven and the passions it has engendered. Professor Andrew Jones of London’s Cass Business School argues: It is important to differentiate between neoliberal economic globalisation and wider globalisation (integration of society). For the former, the answer is yes, probably. It has led to too 50

BRAVE NEW WORLD great a widening of inequalities, which is now manifest in nationalist and anti-globalisation politics, Brexit being a case in point. If the terms of globalisation can change, however, the benefits of economic/social integration are still there. It is not clear if supranational institutions are able to adapt though. In the long term, I would expect other forms of wider globalisation to continue – and, indeed, they still are.27

The prolonged Brexit debate in Britain has been widely criticised for the unwillingness of elected politicians to fulfil the wishes of the electorate, for their coarsening of public discourse and for allowing unpalatable forces of racism and anti-Semitism to surface. But, in its own way, it was illuminating. It exposed dissatisfaction with the course being taken by corporations, the economy and society. It also allowed greater exploration into the kind of country people wanted the UK to be, the durability of the UK economy when placed under enormous pressure and the enormous opportunities for building on economic and commercial strengths that are not often talked about. Almost everyone is aware of the significance of financial services in the UK and their contribution to prosperity; when the financial system imploded in 2008–09 it delivered an enormous hit to standards of living. Nevertheless, there is so much else going on in the UK that can prosper irrespective of being part of the EU. The Bank of England’s chief economist and head of the National Industrial Council, Andy Haldane, brings an unusual mix of circumstances to his job. The slim and dapper Haldane is a product of a working-class background in the North East, has travelled the regions widely and recognises the economic and social divide. He recalls: I remember once being sat in Salford in a community centre funded by homeless charities and foodbanks and local faith groups . . . You looked out of the window and saw the gleaming 51

THE GREAT BRITISH REB OOT superstructures of Media City. You looked right and you saw blocks of council estates that have not moved forward in a generation.28

Haldane is a voice of optimism about the future, but recognises how much transformation there has to be if the UK is to punch at and above its weight in the new world order. He told me: We have some fantastic businesses here in the UK. Genuinely world-leading, world-renowned, world-beating frontier companies engaging in state-of-the-art technology products that are winning market share around the world . . . We have the world’s two top-performing universities and five of the top twenty-five universities. There are more frontier companies in the UK than there are in Germany, or France and perhaps even the United States . . . but we have a counterbalancing larger set of companies who have been on the productivity low road. It’s what I’ve called the long-tail problem.29

This book will focus on the UK’s frontier companies, industries and sectors and how best we can leverage them onto a global stage outside of the EU. These fast-growing segments of the UK economy offer the best hope of Britain snapping back from the Covid-19 pandemic. The Johnson government recognised this with the establishment in March 2020 of a £500 million Future Fund through which UK-based companies working in technology, life sciences and the creative industries could apply for convertible loans to support them through the pandemic and beyond.30 The fund offered the possibility of the government taking equity stakes in some start-ups – something which prior to the Covid shock had been considered beyond the pale. In the chapters to come I will look in detail at innovation, R&D and technology, areas in which the UK is strong, which are hands that must be played with confidence and vigour. The British have 52

BRAVE NEW WORLD always been great innovators. There are countless examples of our inventions over the past century: photography, the telephone, television, penicillin, jet engines, computers, radar, microprocessors, the internet and much of the IT and digital gadgetry that is central to modern-day living. From film to fashion, games to software, music to media and advertising to architecture, innovation feeds the UK’s £71 billion creative sector, one of its most important industries, driving economic growth and supporting jobs across the country. Creative Britain inspires the world with its stream of brilliant individuals and creative teams. Architects like the late Zaha Hadid, multifaceted designers like Thomas Heatherwick, visual effects innovators Framestore and branding masterminds FutureBrand are all examples of companies and individuals that have won the UK an international reputation for imagination, inspiration and ingenuity. However, the UK’s international reputation for leadership in innovation faces intense competition from the US, the EU, China and other emerging economies. There have been countless attempts by the government to get behind the success stories, including efforts made by the UK Creative Industries International Strategy. By 2020, this strategy aims to focus more effort on winning more high-value export business. Such ambition will require close collaboration between the public and private sectors but, as is often the case with government projects, success is going to depend on the willpower of ministers, the supply of adequate resources and a willingness to give the same commitment to frontier enterprise as is lavished on the established industrial economy of motor vehicles and aerospace. This is a view publicly voiced by the award-winning economist Professor Mariana Mazzucato, director of the University College London (UCL) Institute for Innovation and Public Purpose. Her research focuses on how innovation links with financial markets to ensure smart, sustainable growth. Themes throughout her work are public value and public purpose, and the global economy’s 53

THE GREAT BRITISH REB OOT ‘makers’ and ‘takers’. Of particular interest to her is finding new ways for the private and public sectors to work better together. Mazzucato has written that the state can be a tremendous force for radical risk-taking, technological innovation and wealth creation.31 She argues that economic forces should serve the public interest, with the public and financial sectors jointly serving ambitious innovation and creating real value. These ideas have particular resonance as Britain seeks to recover from the shock of pandemic and lockdown and the long anticipated divorce from the EU. Recognising the continuing part it needs to play, the government began the process in July 2018 when it announced additional funding to boost growth and innovation in the North East as part of its commitment to the ‘Northern Powerhouse’, the brainchild of former Chancellor of the Exchequer George Osborne. The outcome of the December 2019 election that saw Boris Johnson sweep to power on the back of votes from the North of England underlined the need for balancing or, as Johnson would call it, ‘levelling up’. Covid-19 added another layer to the urgency of ramping up that process. In terms of R&D, Britain is viewed as a global hub because of its universities and their links with business. Much excellence resides here. At the same time, there has been broad political consensus on the need to increase total investment. To deliver this, the UK Industrial Strategy will need to create a vibrant environment that fosters research and innovation throughout the UK’s public services, universities and businesses, and attracts global investment by incentivising companies to locate their R&D here. In 2016, £33.1 billion was invested in R&D in the UK, up from £31.8 billion in 2015. In 2017, the government committed to improve the figure of 1.67 per cent of GDP to a target of 2.4 per cent by 2027, with a longer-term goal of 3 per cent. But clouds were gathering. The UK’s R&D leaned heavily on three industries – pharmaceuticals, aerospace and cars – which, in turn, were reliant on close EU ties. AstraZeneca, GlaxoSmithKline, Airbus and Jaguar Land Rover had 54

BRAVE NEW WORLD all drawn heavily from the well of EU funding and were seen by some as being vulnerable to Brexit. The UK’s technology sector is larger than the rest of the EU combined, and has been one of the fastest growing segments of the UK economy over the past decade. UK technology, offering stability in terms of the supply chain, is in global demand and accounts for 46 per cent of all exports from the UK’s creative industries. Tech businesses are at the heart of the UK economy and are playing an important role in driving growth across the country. The UK has had a wealth of successful start-ups that became global brands, with centuries of history producing innovative and highquality technology. Thus, the UK offers an outstanding environment for global tech companies; its strong start-up culture is bolstered by tech clusters all over the UK and an active venture capital community. The UK has the highest number of initial public offerings (IPOs) and has more tech ‘unicorns’ (a start-up company valued at over $1 billion) than anywhere else in the EU. The UK’s technology economy is strong in electronic systems, communications, data management and analytics, data centres, Cloud services, artificial intelligence, cyberspace, semiconductor design and sensors. The technology we produce underpins all sectors, from financial services and high-value manufacturing to retail and agriculture. For example, as former Prime Minister Theresa May was keen to point out, we are strong in fintech: computer programs and other technology that support financial services. On London’s South Bank, some 1,500 fintech start-ups are exploring many areas and are disrupters of one kind or another but, as I continually warned in my Daily Mail column, we have to ditch the habit of selling off maturing companies, such as the global payments group Worldpay to its US rival Vantiv, or we will lose our place at the heart of this revolution. Professor Andrew Jones of the Cass Business School points to the strength of university and business research-based links. He argues: 55

THE GREAT BRITISH REB OOT The UK has considerably strengthened its HE [higher education] system and university business links . . . There has been a lot of policy aimed at incentivising this, which has been pretty successful compared with earlier decades. Much was aimed at the ‘British disease’ idea that we do research but do not commercialise. Many universities have embraced this very successfully and seen their role as regional engines of economic growth and entrepreneurship. In the longer term, the UK needs to develop entrepreneurial ecosystems that are fitted to the UK context, rather than just copying the US or Germany.32

As well as ingenuity in innovation, R&D and technology, there is a vital need for the UK to display creative thinking in its future trade relations. Free trade is promoted within the EU, but the customs union imposes barriers to trade with the rest of the world. The single market also imposes what many consider to be a burdensome regulatory edifice on economic activity within the EU. EU regulations impose requirements on the organisation of working time, VAT on electronic services and a requirement that every business employing EU workers must provide health and safety notices on equipment in the language of their workers.33 Brexit will give the UK the opportunity to pursue its own free trade policy with the rest of the world, as adopted by Theresa May’s government slogan of ‘Global Britain’ when she ventured into negotiations with the EU. This reflected a determined drive to innovate and to sell goods and services overseas. In August 2018, the then prime minister announced that the UK had secured its first post-Brexit trade deal with African countries. Although emerging markets and newly rich nations account for about 57 per cent of trade and are growing far faster than the old, established and advanced nations, international trade deals could prove hard to get. In 2012, George Osborne set a target of doubling the UK’s exports to £1 trillion by 2020, but by 2017 the value of our exports had risen by just 11 per cent to £617 billion. In a fast-changing 56

BRAVE NEW WORLD world, the UK may find it tougher than it imagined to be completely free of EU ties. It may also find that the benefits of lifting the yoke of EU rule-making and regulation are not so great as enthusiastic advocates of Brexit had thought. At the same time, technology and internet companies, such as the Silicon Valley giants Apple, Amazon and Facebook, are a dominant force and know nothing of national or international boundaries. The same Cloud services are used across continents. Artificial intelligence (AI) is disrupting existing businesses and is making an impact on almost every form of commerce, ranging from autonomous cars to computer driven share trading and hotel bookings. Donald Trump’s arrival in the White House in January 2017, and his ‘America First’ policy, placed the free trade versus protectionism debate back on the international agenda for the first time in decades. The world had become used to rising global trade that brought about increased economic growth. Trump’s position threatened isolation, protectionism and, worse still, risked the return of barriers and a ‘beggar thy neighbour’ attitude to trade not seen since the 1930s. Professor Jones noted: The UK has benefited enormously from being in the single market and does most of its trade with the EU. Brexit is obviously creating enormous uncertainty and there is no upside only downside in trade terms. A key issue is modern ‘just-intime’ manufacturing of goods – such as components – which rely on the frictionless borders so much discussed. Significant disruption will create costs across a huge range of industries (not just cars and aircraft) so this will reduce economic activity. It can be rectified by bilateral arrangements, but this could take a decade or more to reproduce the benefits on the EU.

The task and complexity of negotiating beneficial bilateral trade agreements should not be underestimated. There are few markets/ products where the UK is prevented by the EU from doing 57

THE GREAT BRITISH REB OOT business. Outside the EU, these negotiations are still affected by the power of big players – the US, the EU, China and the ASEAN Free Trade Area (AFTA).34 Nevertheless, many of these countries and blocs show a strong interest in widening free trade ties with the UK. The scope is definitely there. The UK’s trade with distant countries accounts for a small proportion overall, so there is considerable room for stepping up ties and relations. Moreover, it should not be forgotten that the US, at the time the UK exited the EU, was already the UK’s biggest single trading partner. In 2019, the UK’s trade surplus with the US stood at £44 billion. The challenges Britain must face at the start of the third decade of the twentieth century are considerable. In a post-Brexit climate, could an independent country be free to seek its own trade deals? I put this and other points to Shantayanan Devarajan, senior director for development economics and, at the time, acting chief economist for the World Bank. Asked what, in his view, has been the biggest development in international trade, Devarajan replied without hesitation: The move into a rules-based trading system. The World Trade Organization sets up the rules – including how high a tariff you can charge. And this includes China. I think that the acceptance of a rules-based system, even if it ties your hands, is in everybody’s interests.

Our conversation then turned to the UK’s position as a standalone sovereign nation. Could it prosper in some markets because of the comparative advantage it enjoys? He responded: Traditionally, you traded with countries close by, those with whom you had historical ties and those with whom you had a comparative advantage. With technology and other factors, transport costs have come down and proximity is not so important. Also, countries closest to you often produced the same 58

BRAVE NEW WORLD things, so there was no advantage there. The UK has comparative advantage in several areas because it has a highly skilled population and a reasonable infrastructure. Whether Britishtrained accountants can work in Russia or India will depend on how the rules-based system on services trade develops.

Davarajan argued that while trading blocs are useful in accelerating moves towards free trade, there are also opportunities outside: All the countries outside the EU are trading just fine. Trading blocs, or customs unions, help countries trade better . . . If you sign up to a customs union, you agree to a common external tariff. Once you have that, you can actually lower tariffs to zero over the long haul. This means you can accelerate the process towards free trade. The EU’s share of trade with the rest of the world has been shrinking and lower-income countries are growing faster than the richer countries. What we call convergence. They are large markets and could become the more attractive.35

Trade deals with the rest of the world have been dependent on the UK leaving the EU and, with it, the Single Market and the Customs Union. The course the UK set itself upon in early 2020 when it left the EU has allowed that to happen. Indeed, ministers in Boris Johnson’s government went a step further, arguing that in reaching a trade deal with its former partners in Europe full alignment could be abandoned. ‘There will not be alignment, we will not be a rule-taker, we will not be in the single market and we will not be in the customs union – and we will do this by the end of the year’, former Chancellor of the Exchequer Sajid Javid declared in January 2020.36 Javid urged the UK’s companies to ‘adjust’ to this new reality. Former International Trade Secretary Liam Fox set out the government’s export strategy on many occasions after the Brexit 59

THE GREAT BRITISH REB OOT vote. With the UK’s exports of goods and services increasing to a record high of £620 billion in 2017, he wanted exports as a proportion of GDP to rise from 30 to 35 per cent. He told an audience at Bloomberg in February 2018: We have to take a long-term view. And our future must be global because the pattern of our trade is changing. Some 57 per cent of the UK’s exports are now to outside the EU, compared with only 46 per cent in 2006. What is more, while our EU exports are still dominated by goods, our non-EU exports are evenly split between goods and services.37

In preparation for Brexit, talks were held around the world; by early 2018, Fox and his team had clocked up more than 150 visits. Most significant were his talks with the US after President Trump had indicated his willingness to strike an early trade deal. Trump renewed his pledge in 2019 after the election of Boris Johnson as prime minister. The uncertainty about the UK’s future status dogged progress in 2018–19; further, Trump’s wild mood swings between the possibility of a wide-ranging trade deal with the UK and his ‘America First’ instincts could not be regarded as a source of great optimism. The case for looking beyond the EU to new markets has not only been made by those outside the EU. Bruno Maçães, former minister for European affairs in Portugal, predicted that China and Russia will soon play key roles in the global economy in terms of ‘people, goods, energy, money and knowledge’.38 In his 2018 book, Maçães argues that global centres of gravity have shifted previously from the mid-Atlantic through to the eastern edge of the EU, and will be somewhere between China and India by 2050 – what he calls ‘Eurasia’. Professor Peter Frankopan takes a different view. He argues that the world is living in an Asian future. Against such a backdrop, the UK can only benefit by remaining part of an interconnected world, rather than going it alone.39 60

BRAVE NEW WORLD Trade, along with every other issue, was inescapably viewed through the prism of Brexit. In the referendum campaign, many economists argued forcibly that leaving the EU would be wholly negative for the UK. In fact, foreign investment in the UK remained at record levels after the referendum. In 2017, the year after the Brexit referendum, foreign direct investment in the UK climbed £149 billion to £1.3 trillion.40 In 2018, The Economist Intelligence Unit (EIU) reported on the potential effects of Brexit on six key sectors of the economy: financial services, healthcare and life sciences, automotive, consumer goods, energy and telecoms. It concluded that there would be disruption, although the type of Brexit – soft or hard – would determine the exact position. However, it felt that the overall long-term outlook for the economy remained positive.41 Untrammelled immigration was a pivotal and controversial issue in the 2016 referendum campaign. There had been a public backlash and some frustration in ‘Leave’ areas of the country at the number of overseas workers in the nation’s labour force and the pressure put on public services such as hospitals and schools. Easing public disquiet about immigration levels became a major plank in the approach of Theresa May’s government. In September 2018, the cabinet agreed to adopt the Migration Advisory Committee (MIC) report, which found that economic growth could not come via a low-skilled overseas workforce. Brexit would bring an end to the UK being tied to the EU’s freedom of movement rule and a new system would be put in place. The favoured approach was a points-based system based on the Australian model. In February 2020, Home Secretary Priti Patel unveiled an immigration policy based on such a system: the UK would prioritise highly skilled talent from wherever it came. Under the new system, the government pledged that EU and non-EU citizens would now be treated equally – priority would go to those with the highest skills and the greatest talents, whether scientists, engineers, academics or other highly skilled workers. The UK’s 61

THE GREAT BRITISH REB OOT points-based system would cater for skilled workers, students and a range of other specialist work routes, including routes for global leaders and innovators.42 The most contentious aspect of the scheme, to begin in early 2021, will be restricted access for lower-skilled workers. However, arrangements would be made for seasonal migrant workers, such as fruit pickers. The primary concern was that the blueprint was too restrictive and that vital sections of the economy – the NHS, the social care industry and hospitality, all of which are low-paid sectors – would be adversely affected. The theory behind the change is that it could draw economically inactive British citizens back into the workforce and that would encourage firms to invest in the digital and automated economy, thereby advancing productivity. The UK’s jobs-based recovery from the financial crisis was largely based on cheap and available labour. In the uncertain atmosphere following the decision to leave the EU, companies chose to recruit people rather than spend heavily on new plant and equipment. Some organisations chose to store labour by taking on workers surplus to requirement in anticipation that the doors would be slammed shut once the UK was out of the EU. However, the belief that tighter immigration might lead to higher business investment in digital production is an idea that is better in theory than in practice. Tighter control over borders come at a moment when the UK is embarking on major infrastructure projects that require armies of construction workers who simply do not exist. Personally, as the son of an immigrant, I find the idea of closing the nation’s borders to all but an elite skilled group is a reversal of the UK’s usual welcoming attitude to newcomers, and there is also an economic downside. Among the reasons why the UK enjoyed a long period of above-trend growth before the financial crisis, and returned to growth soon afterwards, is because of large-scale immigration. It is those immigrants and their offspring who – when they join the workforce – will pay for the NHS and pensions for an ageing population. 62

BRAVE NEW WORLD The former Chancellor, Philip Hammond, is among those who warned of potential labour shortages in the building, catering and hospitality sectors. Indeed, by 2018 the service industry represented 80.4 per cent of the UK’s GDP and 83.5 per cent of the UK labour force. Boris Johnson’s government listened to some of that criticism and took matters one step further. In adopting an Australian approach that favoured skilled and professional workers, it dropped the qualifying income threshold from £35,000 to £26,500 per annum. It also eased the education demand from degree level to that of an advanced level school qualification or its equivalent. The Downing Street approach was never going to satisfy critics who noted, for instance, that some care workers earn as little as £16,000 a year. The counterargument to that is, with the supply of low-paid foreign labour drying up, economically inactive British workers could be attracted into the workforce by better training and improved rewards. The UK’s open borders and the perception that a crowded island was being overrun with immigrants has made this one of the most sensitive issues for post-Brexit Britain. Unless it is accompanied by resources for greatly improved training in the private and public sector, better monitoring of apprenticeships and a revolution in technical education the policy could hit the buffers, The UK’s near fifty years as a member of the EU created something of a dependence and a shortsightedness on the part of the country. The UK has not always relied on Europe. Our main trading partners in the nineteenth century were the US, Canada, the West Indies, Argentina, Brazil and China. At that time, British settler colonies looked to develop ‘Greater Britain’ as an economic unit, an idea that continued to manifest itself. The importance of the old colonial link is a long-standing one, although the appeal of Commonwealth trade might appear in a very different guise today. The Commonwealth could prove a useful adjunct for the UK’s global trade identity, building on deep, historical roots. The greatest 63

THE GREAT BRITISH REB OOT opportunities will be in the Asia–Pacific region where the UK’s efforts to steer a path between the strategic goals of Washington and Beijing are fraught with dangers. As the UK looks to change its global economic orientation, it can draw encouragement from the past and the fact that we have ploughed a lone furrow before. The UK’s strength in services, from finance to the creative industries, also presents it with advantages, since much of this ‘invisible’ trade is not covered by traditional trade agreements. Removing non-tariff barriers in this area could, potentially, pay off handsomely if smartly negotiated. It was never going to be easy to plot a path that sought to keep two economic superpowers, China and the United States, each vying for hegemony, onside. The UK has to establish its place in the Brave New World of the first half of the twenty-first century without the comfort blanket of being part of a bloc of twenty-eight (now twenty-seven) countries in the EU. That task has been made infinitely harder by the collapse in global trade and the staggering economic downturn and rise in unemployment in 2020. It won’t be easy, but the economic jolt of being out of the EU could, if handled well, be reinvigorating, no matter that the tendency is to argue that the UK has entered a new era unarmed and unprepared. In fact, Britain has huge advantages. Not least in its university and higher education system, which is at the cutting edge of research and technology. During the pandemic Oxford University and Imperial College in London quickly stepped up to the plate in the battle to produce an early vaccine against SARS-CoV-2. As will be seen in the next chapter, the combination of excellence in the sciences and skills in turning invention and innovation into products, start-ups and wealth offers fantastic opportunities.




Science and everyday life cannot be separated. Rosalind Franklin, Cambridge pioneer of DNA At the moment of greatest peril in Britain’s struggle against the surging infections and death count from the coronavirus, the UK’s world-leading life sciences companies, together with university scientists, came to the rescue. Private sector firms made their labs available as the government of Boris Johnson struggled to meet promised testing targets. As impressively, the UK’s two leading pharmaceutical companies, AstraZeneca and GlaxoSmithKline (GSK), embarked on ambitious projects to produce vaccines and palliative medicines that aim to consign the pandemic to the dustbin of history. AstraZeneca (AZ) teamed up with Oxford University with the aim of fast-tracking a vaccine and putting it into production in 2020. It also speeded up research on three potential medicines to neutralise the impact of the disease on patients and offer a degree of immunity. In parallel with testing the efficacy of its vaccine, the company ramped up manufacturing, developing alliances with producers in the US and India so it could rapidly manufacture as many as 2 billion doses of its vaccine. ‘As far as we’re concerned it’s really the culture we’ve tried to build over the last years,’1 the group’s French-born chief executive Pascal Soriot explained. ‘We have 70,000 people started and we try to move very, very quickly. With this vaccine we’ve moved with incredible speed and the whole team is working 24/7.’


MA STER S OF THE R&D UNIVER SE In parallel, Britain’s other big pharma group GSK, with worldleading experience in developing vaccines, announced that in partnership with French rival Sanofi, it too had embarked on a vaccine programme capable of delivering 1 billion doses by 2021.2 GSK’s vaccine would use its adjuvant technology – which promotes a strong immune response to disease – to reduce the amount of vaccine protein required per dose. ‘We believe that more than one vaccine will be required to address this global pandemic and are working with partners around the world,’ the president of the group’s vaccine arm, Roger Connor, said. As the developer of groundbreaking vaccines for AIDS virus HIV, cervical cancer, shingles and many other conditions there was a high level of confidence of success. There can be no greater testimony to the UK’s leadership as a science-based economy than the way in which big pharma committed to play its part in meeting not just the needs of the UK but, as significantly, emerging markets and developing countries in fighting the Covid-19 pandemic. AstraZeneca’s commitment to research and the life sciences in Britain is symbolised by its magnificent new research hub in Cambridge. I visited the Biomedical Campus on a very cold day in November 2018 to check progress on the impressive building. The three-storey edifice has 54,000 square metres of floor surface with 20,000 square metres of laboratory space; its overall shape is that of a major global sports stadium. It dominates the landscape in the manner of the famous ‘Birds Nest’ main arena for the 2008 Beijing Olympics. The scale, imagination and ambition of the project was the brainchild of AstraZeneca’s dark haired, intense, wiry chief executive, Pascal Soriot. The French boss achieved legendary status in the City in 2014 when he fought a brilliant and successful rearguard action against an attempt by an American rival, Pfizer, paradoxically headed by British born Ian Read, to buy the British drug maker for £70 billion. In the recent past many of the UK’s greatest 66

MA STER S OF THE R&D UNIVER SE companies fell under overseas ownership without a shot being fired, but Soriot resisted – in spite of early UK government support for Pfizer – and pledged that an independent Astra would build a world-beating research centre in Cambridge. His defence of AZ and investment in Britain’s future as a science-led economy paid off. During the peak of the 2020 pandemic AZ overtook big oil, in the shape of BP and Shell, to become top company in the FTSE100 with a market value of £110 billion. Soriot said: ‘I told people, okay, we will work together to design the best labs in the world. It was a fantastic integrative process doing that. Don’t worry about MedImmune3 (an AZ offshoot) or AstraZeneca, they are the same. The design is for absolutely outstanding labs and we have a lot of equipment that we are going to allow academic institutions to access.’4 The design promotes integration, collaboration and openness by the extensive use of glass on the façade and at roof level. This reflects AstraZeneca’s collaborative approach to research; open laboratories and transparent glass walls enable new ways of working across disciplines and with external partners, while a central courtyard, open to the public, will put science on full display. During my visit I caught up with the dynamic and visionary Menelas Pangalos, executive vice-president of AZ’s ‘Innovative Medicines and Early Development Biotech Unit’. A member of the company’s senior executive team, he joined the company in 2010 and has transformed the company’s R&D productivity. When we met, his overall responsibility for delivering the Cambridge project was well to the fore. Planning permission for the £330 million state-of-the-art Cambridge building was granted in 2015, followed by significant construction progress, leading to a topping-out ceremony on the site in April 2017. AZ had begun its staged relocation from Macclesfield in the North West in May 2016 but, due to complex engineering and design issues, the site will not be fully open until 2020, when it will house 2,600 staff. ‘Open innovation’ is the key phrase for Pangalos. He explained: 67

THE GREAT BRITISH REB OOT Cambridge is a preeminent scientific place to be . . . and the beauty of where we are is that we are right in the middle of the Cambridge campus. We are the only pharma company here, but although we are the only ‘game in town’, we have become porous and collaborative, which is really important. We are keen to integrate in the community – by giving as well as taking. As well as learning from our colleagues in the university and other institutions, we want to show what high quality science we are doing and marrying up those two things.

AstraZeneca’s investment in Cambridge is a vote of confidence in a UK that has long enjoyed a reputation for academic excellence and economic progress. On the basis of citations in academic research calculated by Scopus researchers, the UK is the most influential in the world. In spite of being responsible for just 7 per cent of global publications, the UK produces 14 per cent of cited works.5 Cambridge University gained its Royal Charter almost 800 years ago. The UK was the first country to industrialise in the eighteenth century and, with a far-flung empire, the UK traded throughout the world. In the words of the old axiom ‘trade follows the flag’, by the middle of the nineteenth century the UK accounted for 23 per cent of global industrial production and its workforce was the richest in Europe. In the twentieth century, the UK had been on the winning side in two world wars, but the nation’s military accomplishments, imperial past, manufacturing prowess and muscular economy had largely disappeared by the 1970s. The British economy looked to be on the rocks and the Labour government headed by James Callaghan sought a loan from the IMF in 1976. However, the following decades saw the UK transformed under the leadership of Margaret Thatcher. Taxes were slashed, trades union powers curbed, exchange controls abolished; Anglo-Saxon capitalism flourished. The UK was revived as an international force. English has been the international language of 68

MA STER S OF THE R&D UNIVER SE commerce and, crucially, the lingua franca of information technology and the internet. In turn, London became a global centre for science, culture and finance. Down the ages, the thread running through all of this has been the UK’s ability to invent and innovate and put it to commercial use, by a creative people with a ‘can do’ attitude. You might never have known this from the roughhouse terms of the political debate surrounding the UK’s departure from the EU, but this has never been truer as the country plots a path well into the twenty-first century. There is a depressing tendency in the national debate to denigrate the nation’s achievements. The question is asked how the UK, outside the comfort zone of the single market, customs union and a market of 500 million people on the Continent, can survive and thrive. This is to ignore the fact that despite all the nation’s problems, this relatively small island remains the fifth largest economy on the planet. That doesn’t just happen. It is partly testimony to the country’s brilliant ingenuity based around our great universities. Much is made of how our universities are empowered by the skills of a greater free-moving EU workforce, the science and research money flowing from Brussels and collaboration with our partners across the EU. This is a very partial version of events. The UK is a scientific and research powerhouse in its own right because its universities are able to attract the best and the brightest from not just Europe but from around the world. UK universities are far more entwined with their US counterparts rather than Europe. However, it is no accident that, in December 2018, in the middle of the parliamentary furore over the UK’s future relationship with Europe, scientists in Cambridge completed the world’s largest gene sequencing project in healthcare, bringing the gift of longer life to many cancer victims. The science was conducted at the Wellcome Sanger Institute in laboratories run by Californian biotechnology firm, Illumina, under the supervision of British scientists.6 69

THE GREAT BRITISH REB OOT Asian students who come to the UK for university and postgraduate education often stay because UK universities offer satisfying research opportunities. However, standing alone, the UK will lose European science and scholarship resources. It is absolutely critical, therefore, that these are immediately supplanted directly by central government. Indeed, we need to recognise and back our academic institutions with more resources for pure research, better matching funds and advantageous tax breaks for R&D, and by providing the funding necessary to take great inventions out of the labs into pre-production on the workstations of factories, studios and offices up and down the country. Too often, great ideas, skills, software, hardware and patents developed in the UK end up enriching other societies and overseas enterprises. It is not an issue of putting up barriers against the interlopers. The UK needs to get full-square behind science and technology developed in the UK if it is to make the best of seedlings nurtured so carefully. The urgency of full-throated support for UK research and tech has been underscored by Covid-19. Not only have the life sciences and tech firms risen to the challenge, they have also demonstrated that they have a key role to play in cushioning the UK economy from the worst impact of coronavirus and lockdown. The UK’s contemporary ability to continue playing on the biggest of stages owes much to its inherent talent for research. Indeed, the country can proudly boast that it is a research powerhouse, a core strength in which the nation must properly invest. As the UK government’s Industrial Strategy White Paper, unveiled in a 2017, noted:7 ‘We are the global leader in science and research: top in the measure of research excellence and home to four of the top universities in the world.’ The quality of UK research stems from our world-beating higher education institutions; the UK is home to four centres of research excellence in the universities of Cambridge, Oxford, Imperial College and UCL. No European rival has anything to match this roll call of pre-eminence. The build-up 70

MA STER S OF THE R&D UNIVER SE of technology hubs around these centres, as well as the next ranking Russell Group with twenty-four universities, is evidence of their enormous status and potential. In 2018, and for the second year running, Oxford claimed top spot in the World University Rankings,8 which judged the performance of 980 universities across 79 countries. Oxford’s innovative research was identified as a particular strength, generating a large rise in institutional income. Renowned as the oldest university in the English-speaking world, modern Oxford is at the forefront of the full range of academic disciplines, including medical sciences, science and engineering, humanities and social sciences. Knowledge transfer and the development of new technologies are among its key priorities. Typical of Oxford’s innovation is its e-Research Centre, which uses a multidisciplinary approach and digital methods to enable collegiate, national and international collaboration in developing and applying innovative computer science and IT to industry. Cutting across the sciences, social sciences, humanities, arts and medicine, the centre has established a broad range of collaborations. In 2006, ten years after it was founded, it housed over fifty staff, including more than forty researchers working on a £10 million portfolio of R&D projects backed by government and EU funding, plus charitable foundations and industrial collaborators. The impact of the work done by its international team can be seen in everything from innovative technology to assist blind and partially sighted visitors to museums through to techniques that improve genetic discovery, faster drug delivery and boosting the analysis of earthquakes. Cambridge was accorded second place in the world rankings. As a result, the UK is currently home to the world’s top two universities for the first time in the thirteen-year history of the table. In 2017, Cambridge had a total income of £1.71 billion,9 of which £458 million was from research grants and contracts. The university is closely linked with the development of a business cluster 71

THE GREAT BRITISH REB OOT of high-tech skills and innovation, known as ‘Silicon Fen’, and forms part of the ‘Golden Triangle’ of leading British universities. A number of world-class multibillion-pound companies have emerged from the Cambridge hub. Most notable was the world-renowned smart chip inventor and manufacturer, Arm Holdings, sold to Japan’s Softbank for £24 billion in 2016, soon after the UK embarked on its Brexit journey. The UK government of the time saw the sale as an important signal that the country was still open for business; fears that valuable technology and patents critical to the national interest could be lost overseas were brushed aside. Cambridge research departments and teaching faculties encompass most academic disciplines. In the 1990s it added a substantial number of specialist research laboratories at several sites around the city, and there is no sign of the expansion slowing. The university and its affiliates have 107 Nobel prizes to their name, including 36 in physics, 26 in medicine and 25 in chemistry. In 2018, it added to this lustrous record when Professor Sir Greg Winter was jointly awarded the Nobel Prize for Chemistry for his work on the evolution of antibodies. Most of his work had been exclusively carried out at the MRC Laboratory of Molecular Biology and the MRC Centre for Protein Engineering, Cambridge. Winter’s work is particularly notable because it led to the spin out of several groundbreaking biotechnology companies. Among them was Cambridge Antibody Technology (CAT), which would go on to be the biggest success story in UK biotech after it discovered Humira, a blockbuster therapeutic antibody. It later became part of AstraZeneca in 2006 as part of a £702 million acquisition. Cambridge has a research collaboration with the Massachusetts Institute of Technology (MIT) in the Boston area, known as the Cambridge–MIT Institute. In August 2018, as part of its partnership with both Oxford and the Open University, it successfully bid for funding to create nearly 400 new doctoral places in the arts and humanities. Research at Cambridge also extends to space. Its data


MA STER S OF THE R&D UNIVER SE processing centre, overseen by a team at the Institute of Astronomy, collects vast quantities of information put out by the European Space Agency’s Gaia mission, with high precision measurements of nearly a billion of stars. It also has high-powered research links with its near neighbours, the pharmaceutical giants AZ and the Wellcome Institute. The latter was involved in a large part of the genome sequencing project from the mid-1990s and plays a significant part in the city’s science park’s IT hub. The collaborative effort between AZ, US genetic scientists and analysts at Illumina is producing health care dividends. In 2018, in a study aimed at identifying rare diseases, scientists in Cambridge were able to report how the 100,000 Genomes Project had been able to provide a diagnosis for one in four participants. For the first time, parents of children with rare diseases were able to know what they were suffering from, ending with a ‘diagnostic odyssey’. Cancer and rare diseases were chosen for the project because both were linked to changes in DNA. The advances in genome biotechnology at Cambridge have been phenomenal. When the genome was first sequenced in 2003, it had taken thirteen years of hard toil and cost £2 billion. The same genome of DNA can now be done in thirty minutes at a cost of £600. Work at the Wellcome Sanger Institute, run by Illumina, demonstrates vividly the advances the UK has made in this science. ‘The sequencing of 100,000 whole genomes marks an extraordinary UK achievement that is transforming the application of genomics in the NHS,’10 remarked Professor Mark Caulfield, chief scientist of Genomics England, the body set up to deliver the project. The UK is home to leading pharmaceutical companies in the shape of AstraZeneca and GlaxoSmithKline, both of which challenge American rivals in their own backyard and across the globe and showed their value in the heat of the Covid-19 crisis. Astra has become a powerhouse in new immunology drugs that promise full cures for early stage cancers. GSK, as well as developing


THE GREAT BRITISH REB OOT world-leading respiratory and asthma medicines, is renowned for developing world-beating vaccines. It is responsible for developing Ceravix, the leading vaccine against cervical cancer, which is one of the most pernicious of women’s diseases. Among other runaway successes is GSK’s Shingrex vaccine, which tackles the painful, debilitating and unsightly rashes associated with shingles. The modern development of AZ provides a powerful example of how companies with deep roots in private sector laboratories are increasingly able to tap into the scientific prowess of the best universities. The origins of the company lie in the early 1990s when Zeneca was demerged from the chemicals, agri-business and pharmaceutical conglomerate Imperial Chemical Industries (ICI) – after an unsuccessful assault on the company by corporate raider Lord Hanson. ICI was a British research powerhouse responsible for the invention of plastic fibres such as polyester and the twenty-first century meat substitute, Quorn. In 1999 Zeneca linked with the Swedish firm Astra to form AZ. The ensuing years saw the Anglo-Swedish firm take its place as a leading global player, with 6,500 UK staff, some £6.1 billion in exports and an estimated £2.5 billion gross value added to the UK economy. However, AZ faced other challenges in the early twenty-first century. Patents were running out on some its best known ‘blockbuster’ drugs, known as such because they had annual sales of more than $1 billion. By 2011, breast cancer drug Arimidex, asthma treatment Pulmicort and heart medicine Toprol-XL all faced competition from generic rivals after their patents expired. AZ then lost its patent on its top-selling combination respiratory drug Symbicort Turbuhaler in Europe in 2012 and in the US in 2014 – the drug had generated global revenues of $3.48 billion in 2013. Also that year, Nexium, its $5 billion a year digestion reflux drug, came out of patent, with Seroquel, its bestselling bipolar drug, following in 2015. In 2016, the patent on AZ’s groundbreaking cholesterol compound, Crestor, also came to an end. As a result, the company was looking to form a pipeline of new generation drugs. 74

MA STER S OF THE R&D UNIVER SE The ability to build on outstanding R&D by converting concepts into delivering drugs clearly became commercially critical. In 2013, AZ announced that it was relocating from its traditional research base at Alderley Park, Macclesfield, Cheshire to Cambridge, so centralising its R&D and its corporate global headquarters. The company wanted ‘a more vibrant environment that puts science and the patient at the heart of everything the company does’. By 2019 it was clear that AZ’s bet on science was a winner. The focus on immunology and a new range of oncology drugs that attack cancer cells was delivering medical and commercial dividends. Several of its new treatments were showing their paces. The lung cancer treatments of Imfinzi and Tagrisso were being widely adopted. AZ’s medication, Lynparza, for ovarian cancer saw extraordinary growth, with sales climbing 61 per cent to £1.4 billion in the 2018 financial year. Chief executive Pascal Soriot was showing irrepressible enthusiasm for what would come next. Among other things, AZ was working on new blood tests that could find markers for cancer cells. The earlier most deadly cancers could be identified, the sooner the new immunology compounds could be administered and the odds of a complete cure dramatically increased. AZ also recognised the opportunity for supplying advanced British drugs to China, a huge potential benefit to the UK as it seeks to become more global in its vision. Soriot noted that in the era of President Xi Jinping, Beijing ‘placed innovation at the centre of strategy’.11 In the past, science-based companies had been concerned about working in China, fearing that their patents would be cannibalised: You can’t have innovation if you don’t respect patents. They, China, are starting to have their own innovation reporting and intellectual property. We don’t worry so much about this. Where we worry is about biologics (treatments developed in living systems) because in this area we do have intellectual property, as well as the way you manufacture the product.12 75

THE GREAT BRITISH REB OOT Cambridge, where AZ is making its big bet, is not alone in delivering great science. Imperial College, based in the South Kensington area of London, is another UK university of international standing. It focuses on the four main disciplines: science, engineering, medicine and business, and excels in its application of these skills to industry and enterprise. Imperial is home to the greatest concentration of high-impact research – fast tracked to publication and implementation – of any major UK university.13 College members include fourteen Nobel laureates and three Fields Medallists prizes awarded to mathematicians under the age of forty. Since the launch of Strategy 2015–2020, the college has made significant progress and produced groundbreaking research in climate change, global health innovation, energy futures, security science and technology, data science, molecular science and engineering, with its biggest breakthroughs coming in medicine and AI. Included in the work done is a study that scrutinises data to establish the cause of heart failure. In January 2017, clinicians, working with engineers at Imperial’s Department of Computing, showed that machine learning can predict the risk of death in people with serious heart disease faster and more accurately than current methods. They used data from 250 heart patients at Imperial’s Hammersmith Hospital to analyse moving MRI scans of each patient’s beating heart, replicating some 30,000 points to create a ‘virtual 3D heart’. The combination of AI and clinical skills produced a reliable predicator of future heart failure and death. Across London, in the Bloomsbury area, UCL has established cross-disciplinary research groups aimed at tackling the world’s major problems, covering some fifty themes ranging from ageing, cancer, genetics and nanotechnology to design, public policy, governance and transport. UCL’s research has brought outstanding results14 in clinical medicine, computer science, crime science, dentistry, earth sciences, economics, education, English, geography, laws, pharmacy, philosophy, political science, psychiatry and neuroscience, psychology, public health, and Slavonic and 76

MA STER S OF THE R&D UNIVER SE East European studies. The impact of UCL on the wider world was recognised in the Research Excellence Framework 2014, the British regime for rating the research capability of universities. UCL’s Institute for Innovation, headed by Professor Marianna Mazzucato, aims to harness innovation – technological, organisational, social and institutional – in ways that produce public value. Science and innovation has as big a role to play in modernising the governance of the UK as it has in powering entrepreneurship across the economy. The intellectual output of graduates from the UK’s universities is a key element for the UK’s future. They need to develop their doctoral and research capacity to populate new research centres such as the Crick Institute, named after the biophysicist and neuro-scientist Francis Crick, part of the team of Cambridge scientists who discovered the structure of DNA and who won the 1962 Nobel Prize. The ‘Crick’, as it is known, is seen as a flagship institute for UK science. It operates on an inter-disciplinary biomedical research model, which is based in state-of-the-art premises in the redeveloped St Pancras area of London. Its neighbours in the previously undistinguished neighbourhood of railway yards and warehouses include Google, which is spending £1 billion to create a European campus. The huge investment by Google shows how the Silicon Valley giants are embracing London and the UK for its computing and tech skills, irrespective of membership of the EU. The Crick was created from the UK Centre for Medical Research and Innovation, a partnership between Imperial College and UCL, King’s College London, the Medical Research Council, Wellcome Trust and Cancer UK. It has an annual budget of over £100 million, making it the largest single biomedical laboratory in Europe. Among its areas of research are organisms, cancers, the immune system, the nervous system, and microbes and pathogens. The start of 2017 saw the institute up and running with all 1,250 scientists and 250 other staff, with research projects well under way, guided by the Nobel Prize winner in medicine, Sir Paul Nurse. 77

THE GREAT BRITISH REB OOT Imperial and UCL form part of the Russell Group of highachieving UK universities, which includes Oxford and Cambridge who are each engaged in prestige research. In 2016, a study by the consultancy London Economics found that the twenty-four members were contributing services and skills that injected nearly £87 billion into the national economy every year.15 World-class research and knowledge transfer accounted for £34.1 billion. Overall, for every £1 of public research funding secured, it was estimated that the Russell Group universities delivered an average return of £9 to the UK economy, underlining how the UK’s science and technology, if properly supported, can be leveraged into future growth and prosperity. Research at the Russell Group has led to the creation of new businesses and jobs, as well as contributing to efficiency savings in the public services and productivity gains in the private sector. The group’s report16 explains: ‘Our analysis shows how investing in excellent basic research is an indispensable component of the UK’s economic competitiveness and the key to its future growth.’ A terrific example of commercially applied research is Southampton University, my alma mater and part of the Russell Group, which has demonstrated through skills in strong disciplines that it, too, can become a hub for excellence. From the 1960s, Southampton became traditionally known for its work in the spheres of engineering and oceanography but, reflecting its place as one of the UK’s top fifteen research-led universities, it is now widely recognised for its expertise in areas such as aerospace, automotive, life sciences, information economy, nuclear power, oil and gas, offshore wind technology, construction, big data, satellites, robotics, regenerative medicine, agricultural science, advanced materials, nano technology and energy storage. Southampton has built on its specialisms to become a global leader and I am always astonished by the list of inventions, patents and products originating from the science park adjacent to its campus, which was first conceived in 1983 and which, by 2016, had grown vastly, creating and attracting 78

MA STER S OF THE R&D UNIVER SE high-end businesses. Indeed, after the EU referendum in 2016, I was invited to Southampton’s science park to address local entrepreneurs and finance executives on the implications of Brexit for the local, national and global economy. They left, I believe, with a spring in their step. Peter Birkett, its chief executive, told me that the University of Southampton Science Park was created at a time when the transfer of technology into industry and the exploitation of research in higher education institutions were emerging as important national issues. His predecessor as CEO, John Large, thought that science parks were designed to ‘change the culture and arouse British academics to the need for commercialisation’.17 In a bid to establish itself at the forefront of this change agenda, the university transformed its land at Chilworth, to the north of the city, into something to rank alongside those at Oxford and Cambridge. An initial investment by the university allowed the first buildings to be constructed, and this was followed by a partnership with property developers, MEPC, which resulted in significant expansion. In the late 1990s the university became 100 per cent owners of the venture. Since then, the science park has expanded laboratory and conferencing space. Set in seventy-two acres of landscaped surroundings, by 2018 it was home to over one hundred innovative companies at varying stages of development, from start-ups to multinationals. The whole area, with its verdant lawns and landscape, looks similar to the premises occupied by the tech giants in Silicon Valley, who are clustered around the Palo Alto campus of Stamford University. The park offers office and laboratory space and hosts a high-tech business community. Business support is available to early stage and growing businesses through various initiatives, and companies can access some of the UK’s leading scientific expertise at the university. Two developments have reinforced the park’s success. The university’s Catalyst business incubator for tech and digital start-ups has a 79

THE GREAT BRITISH REB OOT successful track record of identifying ideas and future business leaders, which could develop into viable commercial concerns. This has been created in conjunction with ‘SETsquared’ – a collaboration involving Southampton, Bath, Bristol, Exeter and Surrey universities which offers expert support for tech start-ups. A well-established science park venture at Southampton is Fibercore, started in 1982 by members of the university’s Optoelectronics Research Centre, which is now probably the world’s longest established manufacturer of single-mode optical fibres for specialist applications. These fibres are typically used by telecom and CATV cable companies, and colleges and universities because of the reliability of their signals over long distances. In the age of broadband, they are an essential component of the UK’s booming creative sector. The Southampton Science Park has gradually expanded into a custom-built research, development and production facility, pushing the boundaries of technology in aerospace, telecommunications components, sensors and defence, among others. Fibercore won the Queen’s Awards for Enterprise in all three categories: International Trade, Innovation, and Sustainable Development. A neighbour is Symetrica, a spin-out from the university’s Department of Physics and Astronomy, created in 2002 to commercialise high-performance gamma ray spectrometers and imaging hardware and software. In 2005, the company moved to the Innovation Centre at the Science Park and later formed a partnership with Smiths Detection (part of the publicly quoted Smiths Group) to win their first major contract to develop and supply next generation radiation detectors for the US Department of Homeland Security. These are just two of the many business success stories at Southampton, which Peter Birkett explains this way: Over the past decade, the Southampton Science Park has evolved to become an award winning, resilient regional hub of business innovation, recognised for the quality of its environment, 80

MA STER S OF THE R&D UNIVER SE business support and its engaged entrepreneurial community. With strong links to academic research, access to top graduate talent and an impressive contribution to the economic success of the region, it has become an outstanding example of a successful innovation business park.18

But it’s not just the Russell Group. Some of the former polytechnics are also making a fine contribution to applied research. Centres such as Portsmouth and Loughborough – which became universities in the 1980s – provide unique disciplines that are unashamedly vocationally driven and geared especially to the modern world of work. Portsmouth offers courses in animation and entertainment, which offer a direct route into the UK’s creative industries. My own son, Gabriel, who holds a degree in Entertainment Technology, developed his skills as a video/digital/animator at the UK’s most technologically advanced broadcaster, Sky. Loughborough is a world leader in sports technology. However, such institutions of higher education cannot develop in isolation. Their great contribution to the highest quality research, innovation and graduate output must be underpinned by the UK’s schools. They need a support structure in the shape of a schools system that inspires good science, physics and IT education from a young age. Producing 50 per cent university graduates was a fine idea, first mooted by Margaret Thatcher 1980s era and translated into a target by the Blair–Brown governments between 1997 and 2010, but they have to be the right kind of graduates to benefit research and the economy. This inevitably raises the following question: is the UK’s education system fit for purpose and are we getting the best from it? I have identified the contribution from both Russell Group universities and the newer technology universities. Critics argue there are too many institutions of higher education offering too many degrees to too many students. In the 1980s less than 15 per cent of school leavers went to university; by contrast, a target of 50 per 81

THE GREAT BRITISH REB OOT cent was set via the reforms of the Blair New Labour government in the late 1990s. Funding is a key issue as MPs of all flavours have noted.19 In particular, cuts in spending have been seen as a serious problem for schools. Against that, the Department for Education is always pointing to fat in the system – with the £1.1 billion savings it looked to make in 2016–17, rising to £3 billion by 2019–20. But it’s the overarching schools policy that is at the heart of the problem. The constant intervention of political ideology by both Conservative and Labour government tinkering has bedevilled education since the Second World War, in some cases demolishing existing approaches, policies and structures. Reforms of one party have been swept aside by the other with alarming regularity. What emerged from the war years was the tripartite selective schooling system; in their final year at primary school, 11-year-olds sat an exam called the 11-plus to decide where their aptitudes lay. Based on this exam the academically inclined went on to grammar schools, the technically-gifted moved to technical schools, and those with other talents passed to secondary modern schools. For all its weaknesses, this system had served well a British economy gradually emerging from the war years and the austerity aftermath, in the face of outdated industrial practices that stifled progress. Pupils were pointed towards a secondary schooling that matched their skills and potential – ultimately turning out the ‘white collar’ more commercial and the ‘blue collar’ more manual talent the country needed. It certainly served me well when, after my ‘O’ levels, I moved to Brighton & Hove Grammar School (now a thriving sixth-form college), later to university and, ultimately, into a career in journalism. I left school in 1967 just when grammar schools started to come under their most serious threat. The existing system began to be dismantled under Harold Wilson’s Labour governments – particularly in the shape of public school educated Anthony Crosland, an arch-revisionist socialist who saw it as his crusade to 82

MA STER S OF THE R&D UNIVER SE kill off ‘grammars’. Indeed, in his own salty language, he pledged to ‘destroy every fucking grammar school in England’.20 Enter the comprehensives, which have been the basis of state secondary schooling in the UK for the past fifty years or so. Under this system, students of varying talents are housed under the same roof in a ‘one size fits all’ approach. Very much born of left-leaning ideology that everyone was equal, comprehensives continue to divide opinion among politicians and the public at large, but not to the same degree as the grammars. These were further weakened during the Blair years, when any expansion of selective schools was blocked. Selection has become unfashionable in recent times, suggesting an inherent form of bias and prejudice. Even so, grammars still exist in parts of the UK and remain popular with the ambitious middle classes. Sensing this, and swimming against the tide, Theresa May briefly revived the grammars debate by suggesting in 2016, when she took over as Prime Minister from David Cameron, that selection was back on the Tory agenda after having lain dormant for several decades, but her planned grammars expansion, on the basis of increasing public choice, was dropped after the 2017 general election debacle when she lost her overall majority in the Commons. I think the selection argument is best summed up by political commentator Andrew Neil, a former grammar school pupil. He believes that the UK’s great post-war meritocratic experiment fell back when social mobility declined alongside grammar schools. This, he feels, gives independent schools a free run for a bigger share of the top prizes in life: ‘The political consensus among Labour, Lib Dems and Tories is that there must be no selection by ability of any kind in state schools, even as private schools go to ever more elaborate lengths to select the best and the brightest.’21 Grammars have been the ‘hot potato’ issue in education, but there have been other relatively recent policy changes and reforms that are part of the contemporary narrative. Tony Blair’s legacy will be the introduction of academies, which have proved popular with 83

THE GREAT BRITISH REB OOT schools keen to escape local authority supervision and gain the ability to run their own affairs. Michael Gove’s spell as Education Secretary (2010–14) is worthy of close consideration. His legacy of free schools, established as a result of parental and local demand, proved popular with both the public and sections of the teaching community. The option to widen choice and recruit teaching staff independently was embraced. Gove, the Conservative leadership’s resident intellectual, divided opinion. He was a ‘Tory heavyweight’ to some, offering much-needed creative thinking, while a ‘bogeyman’ to others, who saw him as presiding over the disintegration of the schools system. The Gove focus on standards in basic subjects, to the exclusion of the arts and music, is seen as having demoted the economic value of creativity. Nevertheless, one former senior Labour adviser went as far as to describe him as one of the four most influential education secretaries since 1945. Gove was reported to have said he had made it his ‘personal crusade’ to close the gap between the educational attainment of rich and poor students.22 He certainly had little time for the education establishment – education organisations and teacher unions which he nicknamed ‘the Blob’ – for its vested interest in resisting big time changes aimed at raising standards. With this in mind, he reshaped the curriculum and toughened exam grades to provide a truer test of students. The Gove effect shone through in late 2019 when the Parisbased OECD released a report which stated that the UK had made ‘positive’ progress in international school rankings, based on tests taken by 15-year-olds in seventy-nine countries and regions. The Pisa tests run by the OECD showed the UK rising in reading, maths and science, but the UK lagged behind top performers such as China, Singapore and Estonia. The UK’s teenagers were also found to have the lowest levels of ‘life satisfaction’. Andreas Schleicher, the OECD’s education director, said there were ‘positive signals’ to be taken from the UK’s test results in 2018, which, 84

MA STER S OF THE R&D UNIVER SE he said, showed modest improvements. In reading, the UK came 14th, up from 22nd in the previous tests three years ago. In science, the UK came 14th, up from 15th, and in maths the UK moved up to 18th from 27th.23 Analysis by the National Foundation for Educational Research (NFER), showed that the UK’s maths results represented a particular improvement on three years ago. This should have been Gove’s real legacy. However, when the A-level results were published in August 2018, it was evident that his exam reforms to toughen standards had been abandoned. It became obvious that lighter marking had taken place.24 This was compounded by evidence that, where necessary, even the Russell Group universities had dropped entry grades to fill places and preserve income. The UK is on a trajectory to a high skills economy. To feed this, the country urgently requires higher standards for a better educated, higher qualified output from our schools for all-round skills among the workforce, from brain surgeons to plumbers. Not every student is academic and a more diverse range of universities, including the more vocational, may become a primary requirement in the future. The need will be even greater outside the EU when freedom of movement for young people from the EU, who want to work in the UK, will be curtailed. This will be no bad thing if it forces schools, places of higher education, government and employers to focus more closely on practical training and skills for the workforce. A key element in this new direction will be vocational learning and the development of meaningful apprenticeships. The traditional idea of sending apprentices off to tertiary colleges as part of the learning process is no longer seen as fit for purpose. Much of the best intellectual training can be found in-house and incorporated into daily work patterns. An increasing number of careers – certainly the more highly paid jobs – are becoming graduate entry only; therefore, apprenticeships in a range of trades offer the balance our economy desperately needs. 85

THE GREAT BRITISH REB OOT There must be non-academic routes to further education and jobs training that will lead to the world of work. With high youth unemployment looming in the aftermath of the pandemic UK Prime Minister Boris Johnson pledges to boost the apprenticeship system so as to combat the risk of a lost generation similar to that in post euro crisis Greece, Spain and Italy. Schools should be the bridge for encouraging apprenticeships, backed up by further and higher education colleges. Government industrial strategy proposes a number of measures to meet the shortfalls in technical education. It wants to recreate the technical education system that was largely wiped out by the drive towards comprehensives. It proposes putting more money, a projected £406 million, to power up science, technology, engineering and maths (STEM) education, and to support retraining and apprenticeships. The recognition of the shortfalls in UK education is welcome, but the sums of money proposed to deal with the skills deficit are pathetic and nowhere near what is required if the UK is to leverage its science and technological skills into global markets. The promise of 3 million apprenticeships starts by 2020 is laudable, and some of our biggest employers, such as aircraft engine maker Rolls-Royce and defence contractor BAE Systems, have made great strides in integrating apprenticeships with degrees into their recruitment. Indeed, Rolls-Royce’s chief executive, Warren East, reports soaring demand for the technical apprenticeships being offered, which was an encouraging sign. Covid-19 has been a setback, with Rolls-Royce hard hit by the shrinkage in the aviation sector, which has meant painful job cuts for the aero-engine specialist. That should not be allowed to affect its apprenticeship plans, which are a key to sharpening the UK’s engineering skill base. More broadly, many employers are struggling to create new apprenticeships and fit new groups of young people into existing training and work structures. Simply put, counting the numbers without measuring the quality of the 86

MA STER S OF THE R&D UNIVER SE apprenticeships and whether they are in the right place is a waste of time and resources. Germany provides a route map. Apprenticeships are a guaranteed route to a job, which is not the case here. A real need for vocational qualifications that are rigorous and trusted by employers has been identified,25 but successive governments have failed to grasp the nettle, and spending on education for 16- to 18-year-olds was squeezed. The government of David Cameron announced in 2015 that 3 million apprenticeships would be created through its ‘apprenticeship levy’– a tax on companies above a certain size, a target now incorporated into the Industrial Strategy. However, a separate report26 by MPs called for quality over quantity, complaining that existing schemes were not good enough, with only two out of three young people completing their apprenticeships. Strengthening vocational training and providing a highly skilled workforce is plainly essential if the UK is to close the productivity gap with its main competitors. There is a view that the emphasis placed on university and academic training, with a target of half of young people going into further education, has been overdone. Certainly, it is wasteful that some graduates are viewed as over­ qualified for the jobs they do, though Carphone Warehouse, which merged to become Dixons Carphone in 2014, was among the first UK companies to recognise the value of all graduate recruitment. The role of the nation’s universities should not be underestimated. Yes, there is a huge gap between the great research universities of the golden triangle and some of the lesser institutions, but the emphasis on further education, higher degrees and a greater number of PhD places has helped to foster excellence. It is not by accident that the UK is a source of great innovation in dozens of industries ranging from pharmaceuticals to IT and design. It is because of the quality of academic education. It is why the Silicon Valley giants are lining up to recruit IT and computing graduates from universities such as Aberdeen at eye-watering starter salaries. It is also the reason why UK universities are a magnet for overseas 87

THE GREAT BRITISH REB OOT students, not just from Europe, but from China, India, South Korea and the Anglo-Saxon democracies. In much the same way as individuals and families take such pride in being the first in their families to go to university, so must the national discourse reflect that pride and recognise the value of the investment. Too often there is a tendency to deprecate the fees charged by universities, the salaries earned by leading academics and the ‘snowflake’ views of students and other such societal trends. As in any field of endeavour there will be people who game the system, including vice-chancellors living high on the hog on expenses. But, as the UK strikes out on its own, it becomes ever more important to rise above governance failings (although it would be far better if they didn’t exist) and recognise how well the UK can do by moving up the value chain, from being a traditional manufacturing economy, as important as that may be, to being a science-based economy. Engineering the drive for e-cars or the AI that runs the production lines will be more economically valuable than actually assembling the vehicles. The vacuum cleaner to hairdryer inventor, and entrepreneur, James Dyson, recognises this. Early in 2019, James Dyson caused consternation when he announced that the Somerset-based company would be moving corporate headquarters to Singapore as part of a process of ‘future proofing’ operations as the company sought to develop its own electricity driven cars. Significantly, Dyson is keeping the brains of the company, a workforce of 3,500 people, half of whom are engineers and scientists, at its Malmesbury site in Somerset. In September 2017, the Dyson Institute of Engineering and Technology opened at the same location as part of its £31 million investment in UK higher education to help overcome the shortage of engineers it has in the UK. The company also purchased the nearby 517 acre RAF Hullavington Airfield as a base for 400 members of their automotive team. Dyson abandoned its dream of developing an electric vehicle in 2019. The firm unexpectedly disclosed that its engineers had 88

MA STER S OF THE R&D UNIVER SE developed a ‘fantastic electric car’, but that it would not hit the roads because it was not ‘commercially viable’.27 The decision to move some corporate functions to Singapore was seen as unpatriotic because the founder, James Dyson, recognising global change, had been a supporter of Brexit in the 2016 British referendum campaign – but the inventor had long ago recognised the need to locate production near to the fast growing markets of the Pacific. However, he has been adamant that the design, engineering and scientific skills that enabled his company to bring innovation to domestic devices around the globe would remain in the UK. ‘Patents and the filing of patents is, I think, a measure of future wealth,’ Dyson says, but as well as the UK may have done in the past, it has been falling behind. ‘We need lots and lots of engineers and we can’t get them. If we could double it tomorrow, we would double it tomorrow,’ the inventor remarked in 2014.28 He has followed through by creating his own engineering centre and by donating £6 million to Imperial College London for robotics research and £6 million towards a post-graduate engineering centre at Cambridge. The UK is a research and engineering powerhouse in spite of lack of focus and investment. The contribution to the economy made by the Cambridge cluster supports a specialist workforce of 15,500 and generates annual gross added value of more than £2.9 billion. This is mirrored by the work of other research hubs around the country, most notably London and Manchester. As if to underline the point, a 2017 analysis revealed that London had moved up to third in the rankings for global hubs for start-ups, following Silicon Valley and New York. Over the past decade, Labour and Tory governments have made a start on greater state involvement. By 2011, the Cameron government had put in place a £4.6 billion budget for science and research programmes, with £150 million spent on supporting interaction between universities and business.29 Innovations such as Catapult facilities – centres that are aimed at commercialising innovation 89

THE GREAT BRITISH REB OOT and research and making UK business competitive on the world stage – were also introduced. The commitments were made in the face of the austerity that followed the 2008–09 financial crisis. It was a start, but bringing universities and enterprise closer together to enhance the post-Brexit economy is going to be more important than ever. In 2017, the Tory government, headed by Theresa May, set out its updated proposals in its Industrial Strategy document. The paper was filled with good intentions. The plan was to lift total R&D investment to 2.4 per cent of GDP by 2027. It also proposed increasing the rate of R&D tax credits to £125 million and investing £725 million in new Industrial Strategy Challenge Fund programmes to capture the value of innovation. ‘We have committed to the biggest ever increase in public and private investment in research and development,’ the document grandiloquently proclaimed. There was to be a particular research emphasis on the life sciences, AI, EVs, driverless cars, robotics and offshore energy and the like. In addition, £250 million was allocated to fellowships for students and scientists, with a third of this being used to support 1,000 PhDs. The government also set up a £100 million Rutherford Fund – named after nuclear physicist Ernest Rutherford – aimed at attracting overseas talent, which is reckoned to form part of the biggest shake-up of public research funding for more than fifty years.30 The fund was part of a wider range of reforms that saw the creation of an umbrella body, the UK Research and Innovation Agency (UKRI), launched in 2018 to assume strategic responsibility for all public research spending. By 2020, the UKRI was seen as controlling an annual budget of £8 billion, with a target of increasing R&D spending to 2.4 per cent by 2027. Jo Johnson, the then Transport Minister, insisted: ‘In time, the UKRI will gain the reputation as the world’s best funder of science, research and innovation.’31 The new agency was headed by Sir Mark Walport, an expert on immunology (previously the government’s chief scientist) who would be charged with deciding how the R&D funding was to be 90

MA STER S OF THE R&D UNIVER SE distributed. Walport recognised the UK’s excellence in research, noting on the positive side: ‘We are a world leader in many areas of research, effective innovators and widely respected’,32 but he was less impressed with the environment in which the UK’s scientists worked and their ability to bring great ideas to fruition: ‘We have a hypercompetitive environment, characterised by pressure to publish in prestige journals, with rewards given on the basis of personal success rather than team work, especially compared with industry.’33 The power vested in Walport to allocate funds was seen as a highly contentious move as, for the first time, a single agency had unprecedented power to determine priorities and direct funding. This appeared to fly in the face of the Haldane principle34 that had dictated UK science operations since the 1970s. Under the former, government funding allocations were decided by seven research councils – this was aimed at keeping politics out of science funding. However, from April 2018 the heads of the research councils that formed part of UKRI’s executive committee reported directly to Walport. Much of the rationale for the UKRI was to create a body to foster multidisciplinary research. It was seen as necessary because research and innovation needed to confront and manage fast-moving global change. Walport pledged that UK research and innovation would continue to be a system based on pillars of knowledge applied for economic benefit. However, there were further dissenting voices around that time. Data showed35 that with government spending of just 4 per cent on R&D, it was responsible for the production of 8 per cent of the world’s research papers – estimated at 140,000 a year – leading to cutting-edge technology and innovative products. The way in which university and research funds are distributed is regarded by some commentators as misguided. The ‘Golden Triangle’ benefited greatly from the system at the expense of the wider regions, particularly holding back the Conservatives’ vision of 91

THE GREAT BRITISH REB OOT a ‘Northern Powerhouse’ that linked cities, as originally laid out by George Osborne. Centres such as Leeds, Sheffield and Liverpool had much to offer, but were missing out.36 The debate about the distribution of research resources is perennial, but earning world-class research credentials takes a matter of decades, if not centuries. It would be a mistake to remove funding from Oxbridge, UCL and Imperial College London; to do so would dilute excellence to achieve a socio-economic objective. The money needs to follow the quality of the research and the prospects for the science and technology involved. Simply spraying it around to satisfy political objectives should not be on the agenda. There is much terrific research at the Russell Group universities and in some of the former polytechnics, but they should be supported only on the basis of merit if the quality and economic value of what is being done is not to be diluted. As a mark of confidence in the UK as a research hub, in November 2017 a number of foreign pharmaceutical firms revealed plans for more than £1 billion of investment in the UK.37 The goal was to create 1,000 highly skilled jobs. Germany-based Qiagen planned a campus in Manchester, while MSD, part of the US pharma giant Merck, announced it would build a facility in London. These new investments underline how important it will be to underpin the UK’s research base in the post-Brexit world, particularly in areas of competitive advantage such as drugs. The UK clearly has a global reputation for research and the innovation that flows from it. Our knowledge base, including our renowned universities and research institutes, is the most productive among the G8 countries. We have been a world leader in science, with historic contributions from Isaac Newton through to Alan Turing, Stephen Hawking and, more recently, Sir Gregory Winter with his groundbreaking work on antibodies and immunology. In engineering, James Dyson may eventually be seen in the great tradition of his historic heroes Isambard Kingdom Brunel and Sir Frank Whittle, pioneer of the jet engine. 92

MA STER S OF THE R&D UNIVER SE The UK has the history, the research, the technology base and the ability to innovate to take forward the gifts it has to offer to a wider world beyond the EU. The UK is equipped to become a global centre of science, technology and educational research. It is already playing a key role in advances in the fields of AI, robotics and genetic engineering – all of which have truly life-changing qualities. The error, if there is one, is the tendency to ignore achievements and focus on the failures rather than the successes. There are projects of huge prestige, from the Crick Institute to the Diamond Light Source particle accelerator at the Harwell Science and Innovation Campus in Oxfordshire, that are barely recognised beyond the science community. Yet Harwell is the UK’s answer to the Large Hadron Collider (LHC) particle accelerator in Switzerland. Good things should come through the Innovate UK agency, which helps businesses bring new ideas and products out of the lab and into the marketplace. At the same time, other mechanisms, such as Collaborative Research & Development funding and Knowledge Transfer Partnerships, help connect businesses looking for the knowledge and skills that might revolutionise their ways of working. The ‘Future Fund,’ one of the economic support mechanisms unveiled during the pandemic, should aid entrepreneurship. The failings, if there are any, are that of focus, concentration and willpower. Delivery is too often sacrificed for short-term objections and on the altar of day-to-day politics. The Catapult project should ensure that there is a stream of businesses investing here, so recognising this country’s research status. The Formula 1 company McLaren is, for instance, opening a composites technology centre alongside its manufacturing research base in Sheffield. Also, Thermo Fisher Scientific has launched a new cell and gene therapy dimension to its business at Stevenage in Hertfordshire. All this is very positive, but there is a funding gap and closing that gap and getting ahead of it is critical if the UK is to continue to shine on the global stage. In 2017 the UK spent 0.5 per cent of 93

THE GREAT BRITISH REB OOT national output (GDP) on science, compared with 0.7 per cent across the eurozone and 0.77 per cent among the G8’s richest countries. The UK may have done well enough on constrained budgets, but it cannot risk falling behind its competitors as the country strikes out on its own without the cushion of being part of an economic bloc. In the first budget of Boris Johnson’s administration in March 2020, the Chancellor, Rishi Sunak, placed great emphasis on stepping up science and technology investment. The government pledged ‘experimentation with new funding models, and establishing a new funding agency to focus on high-risk, high reward research’.38 Sunak outlined plans to invest £800 million in new UK blue-skies thinking. The new funding agency would be based on the United States’ model of ‘ARPA’, the research institute spun out of the Defence Department which played a leading role in the US space programme. This commitment shows a determination to deliver on its promise to scale up UK science and R&D. The biggest challenge to the leadership of US and British universities in scientific research and R&D comes from China, which is showing an unquenchable ambition fuelled by graduates trained in the Western democracies. In 2018, China’s R&D spending climbed by 12.3 per cent to $254 billion. It set a goal of lifting overall science and R&D resources to 2.5 per cent of GDP by 2020.39 However, the measurement of data emerging from China is not always regarded as wholly reliable; similarly, there are questions about the peer review of research papers that emanate from China. Nevertheless, the UK should dismiss the challenge from China to the academic excellence of its leading research universities, such as its venerated institutions of Oxford and Cambridge, at its peril. There has been concern that Boris Johnson’s points-based immigration system, together with the diplomatic friction stemming from Chinese handling of Covid-19 could impact on the flow of overseas students to UK universities imperilling fee income.


MA STER S OF THE R&D UNIVER SE Brexit cannot be allowed to cut off the supply to our universities of the next generation of world-leading talent, including students, scientists and entrepreneurs. The 2018 Immigration White Paper40 offered a good start with a pledge to scrap the current cap on the number of skilled workers, such as doctors and engineers, from the EU and elsewhere. The introduction of an Australian-style points system for immigration, which focused on the highly skilled, was approved by Boris Johnson’s cabinet in February 2020. Attracting talent is vital to the UK in terms of the contribution made to advancing knowledge, its commercial applications and the flow of business start-ups that come off the back of them. Easy access to world-class researchers, engineers, technologists and computer scientists to the UK’s top educational institutions has been, and will remain, a key to building on past successes. Much needs to be done if we are to achieve former Prime Minister Theresa May’s 2016 rallying call for the UK to become ‘a leader in science and innovation’. Without question, the opportunity is there, but on the political road to leaving the EU the message was lost amid interparty squabbles and the diversion of government energies, including that of the Civil Service, from the UK’s longer term aims. The UK has a wonderful endowment in the shape of great universities, brilliant engineers and excellent entrepreneurs who are capable of taking ideas from the drawing board and turning them into life-saving, life-enhancing valuable products and enterprises. The UK cannot rest on its laurels. The loss of EU funding will have to be covered from the domestic budget, and expanded. The Covid-19 jobs shakeout makes it imperative that Britain recognises the value of research, scientific training and technology skills if the UK is to lift itself out of pandemic gloom and despondency. British universities must also compete with their better endowed US counterparts and aspirational Chinese educational institutions. British research must be nurtured, encouraged


THE GREAT BRITISH REB OOT and promoted if the UK truly wants to be international in its aspirations. Translating pure research into commercial applications and turning them into a new generation of technology will be critical as the UK takes a new path outside the EU and seeks to recover from the trauma of the pandemic. As we will see in the next chapter, Britain is well placed as a tech hub but needs to make sure that its cutting edge is not blunted.




I was taught that the way of progress was neither swift nor easy. Marie Curie, physicist and winner of the 1903 Nobel Prize Towards the end of 2016, a driverless car was tested for the first time on Britain’s streets. The trial, taking place through pedestrian only parts of Milton Keynes, saw a two-seater Lutz Pathfinder travel 1.25 miles (2 km) at speeds of up to 15 mph (with a driver on board in case of emergency). The exercise around the town’s rail station and business district was an enormous advance on previous UK trials which involved a driver manually operating the vehicle. Using virtual maps to navigate and a computer to sense the surrounding environment, the trial concluded eighteen months of development by TSC, a not-for-profit research organisation backed by public money and private sector investment. Many see driverless – or autonomous – cars as the transport of tomorrow and the basis of the automotive industry of the future. This is a view clearly shared by the British government. By early 2018, the UK government had allocated £250 million for its development and testing.1 The Milton Keynes exercise showed the government’s determination to make this country a world leader by being at the forefront of developing driverless technology. With the ambitious target of having self-driving cars on UK roads by the early 2020s, this developing market could be worth £900 billion by 2025.2 Britain is pinning its hopes on research from university-linked start-ups. Indeed, the Selenium software which operated the 97

THE GREAT BRITISH REB OOT vehicle in Milton Keynes test was developed by a team of scientists, mathematicians and engineers from the Oxford Robotics Institute, through a company called Oxbotica. Working in Britain’s favour was our more relaxed regulatory regime. In America, new Federal rules governing driverless cars were still being considered by the US Congress. By way of contrast, Britain’s proposed rules would allow vehicles to be tested on any public road rather than in a designated area. In March 2018, Britain’s Jaguar Land Rover group took up the driverless challenge posed by Google’s Waymo and China’s Baidu company, which had established a lead in developing the technology. Waymo had been testing cars in Arizona, California and Michigan with a view to launching a driverless ‘robo-taxi’ service for the public. Jaguar then announced3 it would be supplying 20,000 of its new electric I-Pace cars in a deal worth up to £1.3 billion. Elsewhere in the automotive industry, this thrust towards a new generation of vehicles has seen advanced technology developing hybrid, dual fuel and electric cars. This sector has grown apace since the 1980s and 1990s when (as in the case of electric cars) progress was becalmed over issues such as the size of batteries, charging points and driving ranges. The major UK manufacturers have all taken up the challenge, with production and sales increasing each year. The global race for electric vehicles with better ranges and the development of fuel cells to power them is one of the challenges of our age, and the UK with its history of innovation aims to be at the forefront. Dyson – renowned for its pioneering technology in domestic goods – joined the race. In August 2018, it announced that it was testing electric cars in Singapore, but it was a short-run experiment. The firm, headed by British inventor Sir James Dyson, said its engineers had developed a ‘fantastic electric car’, but it would not hit the roads because it was not ‘commercially viable’.4 In spite of the disappointment of Dyson’s withdrawal – his enterprise has one of Britain’s largest R&D budgets – the fight goes on. 98

WHITE HOT TECHNOLO GY As the original home of Formula 1 motor racing, much of the tech, engineering and electronics in modern driving comes from work done in the labs of the cluster of motor racing firms scattered across Oxfordshire and the Midlands in what has become known as ‘Motorsport Valley’. Williams Grand Prix Holdings, parent company of the Williams Formula 1 racing team, unveiled a working arrangement with components group Unipart to build a factory to provide batteries for Aston Martin’s first electric supercar, the Rapide E. The joint venture, called Hyperbat, aims to make 10,000 batteries and systems a year at its Coventry plant. Driverless and electric cars are part of the modern technological revolution that point the way ahead, offering direction for British industry and providing a key pillar for future growth. This reflects the fundamental need to grasp the technology of the day, which has been central to government economic thinking in the UK for the past fifty years or more. However, there are real questions, given the resources being thrown at motoring technology by newcomers to the industry, such as the US leader Tesla, Alphabet (parent of Google in the US), Toyota in Japan and the big German car manufacturers, as to who the winners will be. Nevertheless, given the richness of engineering in Britain’s F1 Motorsport Valley, this is an area where the UK has the opportunity to excel. Technology has played its part in driving productivity and growth for decades, but there are serious questions as to whether UK governments have shared a public vision. On an infrastructure level, from the late 1940s through to the 1960s a series of nuclear power stations were launched that fed electricity into the National Grid, which was seen as groundbreaking at the time but when it came to updating the UK’s power generation in the first decades of the twenty-first century Britain found itself bereft of expertise. Westinghouse, the British Nuclear Fuels owned designer and contractors of new nuclear power plants was sold to Japan’s Toshiba5 for $5.4 billion in 2006 in a self-destructive act. As a 99

THE GREAT BRITISH REB OOT result, Britain now had to look overseas for the next generation technology, i.e. to EDF in France and to Japan. Technological advances in the second half of the twentieth century were seen in everyday domestic items. The 1950s saw an increase in the number of television sets sold and the advent of labour-saving devices such as food mixers, twin-tub washing machines and fridge freezers, along with transistor radios and record players. Another big breakthrough for consumers saw the birth of polymer science, which gave us lightweight nylon wear. By the 1960s, British industry, gradually recovering from the war years, was in a pretty poor state – it was still reliant on old production processes and outmoded labour practices. The UK was viewed as the ‘sick man of Europe’ – an image that stuck for a long time. A sea change was badly needed and the first signs of a new vision came on 1 October 1963 when Harold Wilson, the recently appointed Labour leader, gave what became known as his ‘white heat of technology’ speech to the annual party conference in Scarborough. Wilson declared that in order to prosper, a ‘new Britain’ would need to be forged in the ‘white heat’ of a scientific revolution. The speech was rapturously received and evoked excitement with his promise that a modern Britain would embrace the world of technology. Among Wilson’s greatest achievements was the founding of the Open University, which offered people from all walks of life access to advanced education and degrees long before the era of online learning. He sought to take advantage of TV and radio transmissions to reach potential candidates who might previously have found it difficult to access advanced education. However, his dream of transforming people’s lives through technology and modernising Britain was never fully achieved. In much the same way as recent UK governments have been thrown off course by the great European debate on Brexit and the coronavirus in 2020, so Wilson’s vision was occluded by the fight for sterling on the currency markets and an increasingly fragile relationship between his Labour Party and the trade unions. Nevertheless, some of the 100

WHITE HOT TECHNOLO GY seeds planted in the Labour era, through such institutions as the Ministry of Technology and the much derided National Enterprise, did come to fruition. In my view, Wilson’s genius was his ability to lay out a vision using gripping, exciting language. Something which most of his successors, including the Brexit generation of politicians, singularly failed to do. The ‘white heat’ speech marked Wilson’s entry into a longrunning discussion about the role of science in public life. A few years earlier, the novelist C.P. Snow had observed6 in a famous lecture that the British social and political elites were dominated by ‘natural Luddites’, whose ignorance of science and engineering rendered them unfit to govern a world in which technology was becoming ever more important. Wilson later confessed that his aspiration for science and technology had been to ‘replace the cloth cap [with] the white laboratory coat as the symbol of British labour’. After winning the 1964 general election, Wilson reshaped his government to achieve this end. He kept his promise to establish a dedicated Ministry of (Education and) Science, but an unreformed and highly structured UK labour force made a big breakthrough impossible. However, he cannot be blamed for a lack of will or effort. Many of the themes that Wilson addressed in his long ago speech – the promotion of innovation-driven economic growth and a new focus for science policy – remains relevant today as the UK grapples with radical changes to the economy as we shift from being consumers of products to consumers of services. Largely gone are old-style heavy industries and factory-based manufacturing. Instead, we see the ‘knowledge economy’ underpinning much of our activity, with cutting-edge technology leading the way. In the twelve months prior to mid-2018, foreign investment in British tech companies doubled, with London ranking as the second best tech hub in the world after Silicon Valley. Businesses received $7.8 billion of funding and the boost to the tech sector has helped to propel the UK’s growth of foreign direct investment. As a result, the UK has remained the top destination for such funding.7 101

THE GREAT BRITISH REB OOT The UK is attractive to tech investors because we are so well placed, as noted by the House of Lords select committee. Producing great technology, we have a flexible labour market, a skilled workforce – although there is still much to do – and brilliant R&D. We are great at inventing products, ranging from better washing powders to AI, immunology treatments for cancer and much more. All of this needs to be supported. Nevertheless, UK tech leadership remains critical for a better future. In the five years to 2017, the global market – from Silicon Valley to China – looked to our expertise in AI, developing machines with the ability to perform tasks usually fulfilled by humans, much of which has been acquired by foreign corporations. For example, many households have installed the voice recognition digital assistant Alexa. Cambridge-based Evi Technologies, which played a key role in its development, was bought by Amazon in 2012. Elsewhere, Twitter acquired Magic Pony, a video-processing start-up founded by graduates of Imperial College, for $150 million, one of a fertile crop of start-ups that have spun out of British higher education. Other home-grown AI success stories include VocalIQ, Swiftkey and DeepMind – a company I look at in more detail in Chapter 5. Science commentator Matt Ridley summed it up in 2018: ‘The UK has more tech start-ups and more leading universities than the rest of Europe put together, and they rub shoulders with doctors and lawyers in Shoreditch, East London.’8 Some senior figures actually saw AI as the engine of the economy. In May 2018, the Bank of England deputy governor, Ben Broadbent, thought the country would look to AI to make the next big breakthrough for a UK economy he believed was experiencing a slowdown in productivity – an era that was possibly marking a pause between technological leaps forward. Underlining Britain’s pull, the Korean tech giant Samsung announced in 2018 that it was opening an AI centre in Cambridge with 150 scientists led by Professor Andrew Blake, an AI pioneer who previously ran Microsoft’s research lab in the city. 102

WHITE HOT TECHNOLO GY Automation in the form of robotics and AI – known as machine learning – represent the ‘sexy’ end of technology, bringing exciting and fast-moving developments almost by the day. Consumers are central to AI. Artificial intelligence provides us with such things as smartphone content and Satnavs and, as computers start to make their own intelligent decisions, the possibilities are limitless. Indeed, driverless cars, robotic surgeries and factory organisation is already with us. One of the best examples of robotics in UK industry can be found at Ocado, known to millions of families who have their online ordered groceries delivered to their door. The company describes itself as the largest online only grocery store in the world. Ocado delivers on behalf of several major retailers, including the John Lewis owned Waitrose and Bradford based Wm Morrison Supermarkets plc. In 2019 it also forged a £750 million home delivery alliance with Marks & Spencer. Ocado Technology says it is putting the world’s retailers online using Cloud software, robotics, AI and IT. It is all about logistics – organising and combining the work of its warehouses and vans to get goods to its customers. To achieve this, it has designed robots to build what it claims are the most advanced grocery warehouses, where items can be selected without damage. In addition, the company has created a Cloud-based analytics and communications system to oversee the operation of the robots. Its huge customer distribution centres are at Hatfield, Hertfordshire and Andover, Hampshire where, during a February 2017 visit, the BBC reported that the warehouse’s robotics operate through a mass of algorithms and AI and create, in effect, a traffic management system dealing with 8,000 boxes on the move at any one time. Ocado, along with other manufacturers such as the major car manufacturers operate ‘mega level robotics’ in their production processes. The value of Ocado technology became ever more obvious during the coronavirus catastrophe of 2020 when demand for efficient online services soared. The worth of the company on 103

THE GREAT BRITISH REB OOT the London Stock Exchange climbed to a shade under £15 billion.9 At that dizzy level Ocado was worth more than established grocers and retailers J Sainsbury, Wm Morrison and its UK partner Marks & Spencer added together. On a smaller scale, robots are now being introduced to undertake highly delicate tasks such as performing surgeries. In September 2018, British company CMR Surgical launched the Versius robotic surgery system, which was expected to begin operating on patients within twelve months. The Versius robot was designed and built in Cambridge – its makers believe it is smaller and more flexible than existing robotic systems, making it capable of a wider range of operations. Earlier in 2018, AI was used to create a new voice for an American radio journalist who had lost his voice two years prior. Jamie Dupree, aged 54, had been unable to talk due to a rare neurological condition. A new voice was created for him by British technology company, CereProc. It trained a neural network to predict how Mr Dupree would talk using samples from his old voice recordings. Elsewhere in the health sphere, huge sums are being invested in researching new technologies for patient screening; it should be noted that many modern techniques, such as MRI scans, are British in origin. The development of this revolutionary imaging system by Sir Peter Mansfield at Nottingham University has helped change modern medicine. Another huge technological breakthrough has come with rapidly advancing and innovative three-dimensional (3D) printing technology, in which material is joined or solidified under computer control to create a three-dimensional object. Materials such as liquid molecules or powder grains are added together to create the final effect. Objects of almost any size or shape can be created from a 3D model or another electronic data source, such as an open additive manufacturing file format for additive manufacturing processes like 3D printing. Amazing things can be produced, which includes everything from pizzas, animal parts, drones, cars and houses, through to bionic arms, ears and human tissue. The 104

WHITE HOT TECHNOLO GY UK has played no small part in the development of 3D printing thanks to the work of scientists at the Oxford and Glasgow universities, plus a whole raft of business start-ups that have pushed the sector forward. One company successfully employing 3D printing is the Midlands-based GKN Driveline, which designs and builds vehicle powertrains – e.g. engines, transmissions, drive shafts and differentials – for more than nine in ten of the world’s top auto makers.10 GKN’s client list includes some of biggest names, from Fiat to Ferrari. Each relies on GKN to keep its production line optimised so they can benefit from just-in-time production, which keeps their operations competitive. Any delay could have serious knock-on consequences. In replacing traditional production techniques with investment in 3D printers – and with it, moving from buying in plastic and metal tools to producing its own – lead times are cut by up to 70 per cent, while at the same time reducing dependence on outside suppliers. An example of the benefits of 3D came when a cable bracket went missing from one of its robots; GKN produced a new one on site and saved the week or more that would have been lost if it had needed to wait for the robot’s manufacturer to source and dispatch a replacement. Another technology success story can be found in GKN’s Driveline division which produces the bestselling Power Driveshaft, employing some 22,000 staff at fifty-six locations across twenty-two countries, including three sites in the Midlands. The multinational Driveline division is an automotive components manufacturer that specialises in driveline technologies. Driveline is the world’s largest producer of constant velocity joints (CVJs). Other products include side shafts, prop shafts, power transfer units, differentials, AWD couplings, disconnects, electric rear axles and electric drive transmissions. Its Power Driveshaft is designed for tough, continuous use by drivers of off-road vehicles, as well as for machinery used in construction, mining and large farming operations. 105

THE GREAT BRITISH REB OOT GKN has a strong record of exporting leading-edge driveline technologies to China. In April 2017, the company announced that it had launched a lighter and more compact CVJ for a number of customers in the market. It was to be manufactured in Shanghai, in a joint venture, and will feature on cars produced by Volkswagen, Audi, Ford, PSA, Jaguar Land Rover and Great Wall. Among the crown jewels of GKN R&D is its work on the electric driveline systems that will power next generation electric vehicles. It is one of the areas of motoring technology where the UK has a decent shot at leading the world. Fear of the loss of R&D and innovation was among the reasons why, in 2018, as a City Editor, I forcefully campaigned against the £8 billion takeover of GKN by Melrose Industries, a ruthless and financially driven UK quoted company whose motto was ‘buy, improve and sell’. My fear was that, under Melrose, malevolent control of valuable UK technology would end up in private equity or overseas hands, with the ensuing loss of R&D. In the event, Melrose won the takeover by the narrowest of margins on the very last day of the contest. To secure victory, Melrose was required to make a number of undertakings to the government about jobs, plant closures and the preservation of research budgets. The value of British innovation was underlined in March 2018 when German giant, Siemens, invested £27 million in a state-ofthe-art manufacturing facility for its Worcester-based Materials Solutions, its additive manufacturing specialist. The building, which was set to open in September 2018, will enable it to increase its fleet of 3D printing machines from fifteen to fifty. The new factory is to be fully powered by Siemens Digital Enterprise technologies solutions. Founded in 2006, Materials Solutions is a pioneer in the use of Selective Laser Melting (SLM) technology for the manufacture of high-performance metal parts. In 2016, Siemens acquired an 85 per cent stake in the company, which offers comprehensive services for engineering and printing up to the complete manufacturing of parts for the aviation, 106

WHITE HOT TECHNOLO GY automotive, power generation and motor sports industries. Former Business Secretary Greg Clark said at the time of the Siemens investment: ‘Innovation is at the heart of the future of UK manufacturing and this factory will produce a game-changing technology that has the potential to transform the UK’s industrial base.’11 The timing of the deal was politically useful for the Conservative government of Theresa May (2016–19), which was determined to show that Britain was still wide open to foreign investment in business, in spite of the still unresolved issues surrounding the UK’s involvement in Europe. Yet this deal was another example of how the UK, through the excellence of its science and inventions, handed over the keys to an overseas company. What Clark saw as being in the national interest could also be seen as a failure to back a winning British technology and scaling it up. One of the promises of the new technologies – AI, robotics, 3D printing – is that it offers opportunities for bringing back production to these shores, known as reshoring. Among the leaders in this industrial group is Liberty House, which has moved fast by building high-tech facilities in the Midlands to reshore the manufacturing of aluminium castings for the motor industry. Liberty House was founded in 1992 by industrialist Sanjeev Gupta. The company focuses on ferrous and non-ferrous metal trading, metals recycling, steel and aluminium production, engineering products and services. In February 2017, the company purchased the speciality steel division of Tata Steel Europe for £100 million. Liberty Vehicle Technologies, part of the global metals and engineering group, later unveiled plans to invest £10 million in the creation of a centre of excellence at Leamington Spa to accelerate its growth in the automotive sector. The flagship 50,000 square foot facility, which opened in 2018, was designed to boost the group’s technological development and expand its manufacturing capability into the advanced auto components market. Liberty, a leading supplier to several major vehicle manufacturers, went on to acquire Amtek, a top UK manufacturer of cast aluminium engine and 107

THE GREAT BRITISH REB OOT vehicle components with plants in the West Midlands and Essex. Similar projects are under way with bicycle manufacturing, another traditional Midlands industry. In this way, Liberty looks to play an important part in reshoring production to the region, so bringing back employment and skills. This has helped breathe life into British manufacturing by helping to revive steelmaking, engineering and manufacturing, and by building an integrated British supply chain that includes as many parts of the production process as possible. Cutting-edge technology is key to the continuing success of one of Britain’s oldest companies, e.g. Unilever, maker of some of the best-known consumer brands in the world. Starting out as Lever Brothers on Merseyside, it merged with Margarine Unie, a Dutch company, and now manufactures over 400 products which are sold in around 190 countries. These household favourites range from cleaning agents and personal care products such as Persil, Daz and Dove to foodstuffs such as Hellman’s, Marmite and Magnums. Unilever had a turnover of around £50 billion in 2017, marking it out as the third largest listing on the London Stock Exchange and Europe’s seventh most valuable company. It proudly boasts that innovation drives its pursuit of sustainability, with science, technology and product development central to its ethos of maintaining great brands that improve the lives of its customers while having a positive impact on the environment. The company works on a wide portfolio of projects that involve the search for breakthrough technologies through extensive partnerships with leading scientists, academic institutions, suppliers and specialist businesses. Unilever invests nearly £1 billion a year in R&D, which employs 6,000 staff. The company claims a strong record for achieving breakthrough innovations – disruptive technologies that meet consumer needs better than any available alternatives. The development and testing of new technology takes place until it fits the product description. A good example can be seen with its Dove soap range. Dove was launched 108

WHITE HOT TECHNOLO GY in 1957 and, by contrast to its rivals, not only removes protein, fat and dirt, but – through Unilever technology – helps preserve skin moisture. This way, the products are regarded as technology platforms for subsequent innovations and as a way to differentiate brands. Another example of the company’s approach to technology is in fragrances, which is a primary driver of consumer preference in most products. There is also a strategic science group whose job is, quite simply, to find things to invent. In May 2017, it was using groundbreaking technology to tackle the global issue of plastic sachet waste by way of a form of recycling. In 2017, Unilever’s chief executive, Paul Polman, stood firm against a potential takeover by US private equity backed Kraft Heinz, but a year later ran into fearsome opposition when he sought to move the company’s stock market quotation from London to Rotterdam, but was forced into a humiliating retreat. There are many buzzwords for the technology of tomorrow, none more so than the Internet of Things (IoT). This concerns the ability in our increasingly connected world for consumer and industrial devices such as smartphones to have chips inserted into them to collect and communicate data. Increasingly, it is no longer simply being connected to the internet; it is more to do with devices talking to one another producing information that can be analysed and acted upon. The IoT can then bring those networks together. For example, data transmitted every half-hour from the Cloud provides information on temperature observations, which allows for weather patterns to be predicted with greater accuracy. Britain is fully active here. Its IoTUK programme, powered by Digital Catapult and Future Cities Catapult, was launched as part of its £32 million investment in the IoT.12 The programme aims to advance the UK’s global leadership in the IoT and increase the adoption of high-quality technologies and services throughout businesses and the public sector. Britain’s leading edge in IoT is greatly indebted to the skills of Cambridge-based Arm Holdings, sold to Japan’s Softbank in 2016 with the government’s blessing. 109

THE GREAT BRITISH REB OOT The deal will, I fear, have devastating consequences in terms of the drain on skilled engineers, patents and inventiveness. Virtual and augmented reality (VR/AR) is a further area of advanced technology. Research carried out by PwC, in partnership with Immerse UK and Digital Catapult, looked into the location of VR/AR organisations, how much funding was being received and which universities were involved in research. Not surprisingly, London housed the majority of the 463 companies listed. Some 65 per cent of the companies focused on producing content, while 25 per cent developed the technology to build and enhance future VR experiences. The remaining 10 per cent operate in the service sector, for example, building a dedicated VR cinema and providing VR/AR marketing services. UK-based law firms have been so impressed they have offered to tailor services to VR/AR companies. The technology has shown no signs of slowing. With over half of the companies at an early stage, either micro or start-up, VR and AR revenues are set to rocket from £4.2 billion in 2016 to more than £130 billion in 2020, according to research from the International Data Corporation.13 Emerging players in the industry clearly hope to cash in on the boom. Hot start-ups in the UK, many resulting from university friendships and collaboration, include Digital Bridge, WaveOptics, MVR Global, Immerse UK, VRTU and Improbable. It would be distressing and destructive for Britain’s prospects if these start-ups end up in overseas hands. In the energy field, nuclear power continues to be central to government policy. In the late 1990s, nuclear power plants contributed around 25 per cent of total annual electricity generation in the UK, but this has gradually declined as old plants have been shut down and ageing problems have affected plant availability. Under the EU Renewable Energy Directive, 30 per cent of UK electricity should come from renewables by 2020. So, in November 2015, the government set new priorities for energy, which involved the phasing out of coal-fired electricity generation by 2025, building 110

WHITE HOT TECHNOLO GY new gas-fired plants and placing much greater reliance on nuclear power and offshore wind to grapple with ageing plant and a heavy reliance on coal. The UK has fifteen reactors generating a baseload of up to 21 per cent of its electricity, but almost half of this capacity is to be retired by 2025. The Électricité de France super nuclear generator at Hinkley in Somerset (discussed in Chapter 9) will replace part of this lost capacity, but that will still leave a shortfall if we are to have reliable and secure sources of energy supply. Among the solutions posited is the development of full fuel cycle facilities, including major reprocessing plants. The first of some nineteen new generation plants is scheduled to be on line by 2025. Thus, nuclear capacity, if it can be financed, will be part of the solution. Renewables will also be required to play a big role. Britain is also placing a lot of time, effort and money into green technologies and, by 2016, it is reckoned that this country will be one of the leaders in renewables,14 but you might not recognise that from the demonstrations led by Extinction Rebellion in 2019 or Labour’s manifesto for the December 2019 election. In fact, the UK boasts the world’s largest offshore wind farm and Europe’s largest floating solar park at Langmead, near Abingdon. From 2011, with the help of more than £10 billion in subsidies, the UK forged ahead in the world of green power. A record 25 per cent of electricity generated in 2015 came from wind farms, solar panels and other renewable power sources. For the first time, renewable sources provided more power than coal. That put Britain within shouting distance of Germany, home of the ‘Energiewende’ green power revolution. Germany generated 27 per cent of their electricity from renewables in 2014 and about 33 per cent in 2015. The speed at which renewables grew in the UK led the government to start curtailing some subsidies, which were largely paid for by levies on consumer energy bills. An innovative technological collaboration with ‘green’ implications has come about thanks to Norway’s electricity surplus. The 111

THE GREAT BRITISH REB OOT Norwegians’ huge hydro-electric power capacity means that its domestic energy demand is more than met. As a result, it is happy to export any surplus. A deal has been agreed between the UK and Norway, and work on a North Sea link connecting Norway to the UK began in 2015, with the fuel interconnector scheduled to go on line in 2021. The North Sea Link (NSL) is a project developed jointly by National Grid North Sea Link, a wholly owned subsidiary of the National Grid, and Statnett, the Norwegian power grid developer and operator. The prospect of the British–Norway deal promises greener and more secure electricity for both countries. Britain and Norway will be able to trade energy and contribute to greater production of renewable energy on both sides.15 This will give both countries a wider spread of electricity supply to turn to when needed. If the UK’s wind and solar supplies become low, we will be able to draw on Norway’s carbon-free hydropower and, when Norway’s supplies are low, they can import electricity from the UK. The NSL involves nearly 720 kilometres of undersea cabling – thought to be the longest connection of its kind in the world – with further cables onshore and converter stations at both ends. The British station has been built near Blyth, Northumberland, which will be linked to the National Grid. The project is estimated to have cost €2 billion, backed in part by EU funding. The fate and replacement of that funding will have been thrown back into the melting pot by Parliament’s final decision to leave the EU. The UK already has interconnectors with France, the Netherlands, Northern Ireland and the Republic of Ireland which, in 2016, accounted for more than 6 per cent of the UK’s power demand. A fifth interconnector, the cross-Channel Nemo Link with Belgium, will provide electricity for Kent through Folkestone. Interconnectors such as these may also play a big part in helping the UK meet its target of closing all of its coal-fired power stations by 2025. Nevertheless, the demand for electricity is expected to soar as ever more people are encouraged to switch to electricity powered motor vehicles. One British technology solution is the 112

WHITE HOT TECHNOLO GY Rolls-Royce designed small modular nuclear reactor. Fuel cell and storage technology, as well as wave power generators, could also play a role, but that is going to require government backing on a scale that has previously been missing in this country, which is scared to involve itself in the free market. Aerospace, with everything from hypersonic flight through to drones, is another exciting growth sector with great potential for British technology. The abandoning of British Airways and Air France’s Concorde services in 2003 meant supersonic flight came to an end. Approaching twenty years on, plans for superspeed air travel has turned to hypersonic flight, where planes can fly at speeds above Mach 5 – that’s around 3,900 miles per hour. This could get you from London to New York in sixty minutes, beating Concorde’s maximum capability of Mach 2.04, some 1,354 miles an hour.16 In April 2018, Boeing HorizonX Ventures invested in Oxfordshire-based Reaction Engines, a leader in advanced propulsion systems whose technology will contribute to the next generation of hypersonic flight and space access vehicles. Founded by three propulsion engineers in 1989, Reaction Engines produces the Synergetic Air Breathing Rocket Engine (SABRE), a hybrid engine that blends jet and rocket technology, which is capable of Mach 5 in air-breathing mode and Mach 25 in rocket mode for space flight. As part of the SABRE programme, the company developed an ultralight heat exchanger that stops engine components from overheating at high speeds, thus improving access to hypersonic flight and space. Sir Michael Arthur, President of Boeing Europe and Managing Director of Boeing UK and Ireland, noted: This is an exciting time to partner with cutting-edge British innovators, and a reflection of the impressive technology coming out of the UK’s aerospace industry today. Investments in future technologies such as Reaction Engines support the prosperity of the UK and ensure we meet our customer’s future needs.17 113

THE GREAT BRITISH REB OOT Just two months later, in an attempt to meet the insatiable global demand for small commercial satellites, the government announced that a peninsula on Scotland’s north Highland coast had been identified as the site for the UK’s first spaceport. Telecommunications satellites are in great demand in a business reckoned to be worth trillions of pounds in years to come. Vertical rocket and satellite launches are planned from A’Mhòine, Sutherland, located between Tongue and Durness, and the UK Space Agency has said the move could pave the way for spaceflights from that site. Highlands and Islands Enterprise would receive £2.5m from the government to develop the spaceport, which could be up and running by the early 2020s. Greg Clark, the former Business Secretary, explained that one in four satellites were made in Portsmouth and Stevenage, but had nowhere for a UK launch, saying: ‘Aerospace is one of Britain’s most profitable and productive industries.’ More is the pity that it was on the watch of Clark and his successor, Andrea Leadsom, that two of the UK’s aerospace pioneers, the satellite group Inmarsat and flight refuelling and space group Cobham, fell to overseas buyers. Both were transactions that breached the public interest test, but were nodded through virtually unhindered. Theresa May followed up on Clark’s verbal backing for aerospace by pledging extra investment for the aerospace industry. In a speech at the Farnborough Air Show,18 she offered more than £300 million for several projects. This included research on more environmentally friendly aircraft, additional money for the Sutherland spaceport plus another to follow in Cornwall and a long-awaited commitment to building a new high-tech aircraft to replace the Typhoon. It was also divulged that the earth dishes at Goonhilly Down in Cornwall, part of our rich communications heritage from the 1960s, had been chosen to track the Moon and Mars space programmes. An £8.4 million refurbishment project would get under way to upgrade its satellite antennae. These announcements were designed to allay fears, expressed by the House of Lords,19 114

WHITE HOT TECHNOLO GY that Brexit could damage the UK’s capacity to lead space missions. Peers were concerned that leaving the European Space Agency could see this country jeopardising its lead in space science R&D. One of the fastest growing areas of flight technology is the drone, whose arrival over the past decade has been revolutionary. Their military use by the Americans in the Middle East has raised serious strategic questions. Most tellingly, in January 2020 when US President Donald Trump ordered the assassination of Iranian Major General Qasem Soleimani of the Islamic Revolutionary Guard Corps.20 The move unleashed retaliatory action from Iran and led to a tragic missile strike against a civilian airline headed for Ukraine, in which 176 people died. On a more prosaic and constructive level, small civilian drones for pizza and parcels delivery, aerial photography and search and rescue missions have already become part of our everyday lives. There is great scope for the development of drones to provide surveillance for city, public and emergency services, as well as by the security services and the armed forces and for commercial purposes, such as filming and many forms of deliveries. Whereas there are privacy and safety aspects that still need to be settled, there is potential for this part of the UK aerospace sector. Research in 201821 showed that by 2030 drone technology could help the UK achieve up to £16 billion in cost savings through increased productivity, while boosting the economy by as much as £42 billion in just twelve years. The study predicted that 76,000 drones (or unmanned aerial vehicles) will have taken to the skies by 2030, potentially replacing many service occupations, including safety monitoring and inspection roles, in numerous industries. Structures and locations such as oil rigs, factories and farmlands could be inspected and analysed far more quickly, cheaply and safely than by a helicopter or manual inspection. The operation and construction of drones could also create new job opportunities with as many as 628,000 people eventually working in the industry, with a significant proportion working in new, highly skilled positions. Businesses developing drone technology in the UK 115

THE GREAT BRITISH REB OOT can also benefit from this country’s generous R&D tax breaks. Small and medium enterprises qualify for a 230 per cent deduction on qualifying costs, as well as a 14.5 per cent credit on any losses incurred. Large companies, meanwhile, can apply for a 12 per cent credit on their qualifying R&D expenditure. Backing UK aerospace technology with R&D tax breaks and matching funds will be immensely important if the UK’s little recognised innovation in this area is not to be dissipated. In an allied sphere, in conversations with Rolls-Royce in late 2019, company officials told me that they are developing engine technology for hybrid and electrically powered planes for the next generation of narrow bodied aircraft. With cooperation from helicopter manufacturers and small airframe companies – and adequate R&D backing from the government – it could, in the next several years, be in a position to test run the technology on island hopping aircraft over short distances. Towards the end of 2017, the technology spin-off arm of Formula 1 team Williams and Airbus announced that they were joining forces on the aero giant’s Zephyr high-altitude drone project. The joint project between Airbus and Williams Advanced Engineering will look at ways of integrating battery and electric cell technologies into the Zephyr programme. Zephyr is a recordbreaking, solar-powered drone with unique communications and surveillance capabilities that is capable of flying at more than 65,000 feet above commercial traffic for months at a time. The first production examples were produced by the Ministry of Defence at Farnborough. Military and cyber security is another vital focus for British technology in its efforts to meet the growing challenges facing the UK. The UK’s leading surveillance skills, which have been developed over generations, has put Britain at the heart of European and global security and plays a central role in, for instance, the ‘Five Eyes’ alliance, which also includes the intelligence gathering services of the US, Australia, Canada and New Zealand. 116

WHITE HOT TECHNOLO GY In 2003, Britain became part of the Galileo project, a navigation satellite system created by the EU through the European GNSS Agency but, after the 2016 Brexit vote, a row developed over the UK’s future involvement, which became embroiled in the departure negotiations with the EU. Brussels implied that by leaving the EU the UK could not be trusted with security information and could only have ‘third party’ status with access to a signal only. Faced with this threat, in May 2018 the Ministry of Defence announced that the UK was preparing a £3 billion satnav system of its own. By August 2018, £92 million had been promised by the Treasury for a feasibility study into plans for a UK system. As of the summer of 2018, Britain had already spent £1.2 billion on Galileo, with the UK Space Agency saying that a British project would have a head start thanks to work already done and because much of the expertise was UK-based. In July 2020 the UK government agreed to invest £400 million in troubled space firm OneWeb as part of the effort to strengthen its satellite presence. Physical threats to the UK come in the form of cyber warfare. These threats come from hostile powers seeking to gather data and propagate disinformation, or from digital blackmailers seeking to hold business to ransom. An example of this occurred at the turn of 2020 when the nation’s largest foreign currency exchange, Travelex, was forced to revert to paper and pencil transactions after it was held to ransom by cyber hackers.22 It was a scene that could have come directly from one of Stieg Larsson’s financial thrillers. The digital-based, internet-related world is under constant challenges from state and criminal hacking designed to cripple public and commercial IT systems. This is the greatest downside of our ever-growing reliance on IT. In 2018, the Internet Society’s Online Trust Alliance (OTA) report on the worldwide economic impact of cybercrime estimated losses of $45 billion. Prodigious resources have been directed at combatting this threat. Cyber security is a fast-growing industry in which the government, local authorities, public bodies and business invest 117

THE GREAT BRITISH REB OOT heavily. The National Cyber Security Centre (NCSC), set up in 2016 as an arm of GCHQ, protects the vital interests of the UK against the actions of hostile states such as Russia and North Korea. The centre is part of the government’s National Cyber Security Strategy, which set out the action required to protect the UK economy and the privacy of British citizens while encouraging industry to up its game to prevent damaging cyberattacks. In October 2018, the NCSC reported that it was dealing with ten attacks a week. Most worryingly, the NHS and the banks had been attacked. The strategy, drawn up to strengthen the government’s own defences as well as making sure industry took the right steps to protect ‘critical national infrastructure’ in sectors like energy and transport, would be carried out through industry partnerships using automated defence techniques to reduce the impact of cyberattacks by hackers and stop viruses and spam emails from ever reaching their intended victims. Significant investment has been pledged to take the fight to those who threaten the UK in cyberspace, while more specialist cybercrime investigators and technical specialists are to be recruited by the National Crime Agency. In addition, a centre for cyber innovation – the London Office for Rapid Cybersecurity Advancement (LORCA) – was set up and its first report found that more than half of our large businesses had suffered a cybersecurity attack in the two years prior to 2018 and that one in four businesses revealed that their cybersecurity was not up to scratch. Nevertheless, the government has forecast that the UK will become one of the safest places in the world to do business. It has a world-class cybersecurity industry and workforce thanks to a new plan underpinned by £1.9 billion of investment. Former Chancellor of the Exchequer Philip Hammond summed up the position in November 2016:23 Britain is already an acknowledged global leader in cyber security thanks to our investment of over £860 million in the last Parliament . . . But we must now keep up with the scale and 118

WHITE HOT TECHNOLO GY pace of the threats we face. Our new strategy, underpinned by £1.9 billion of support over five years and excellent partnerships with industry and academia, will allow us to take even greater steps to defend ourselves in cyber-space and to strike back when we are attacked.

The threat of attack should be a rich vein of income for digital firms specialising in cyber protection. One of the UK’s major innovators, Darktrace,24 is leading the charge towards automated cybersecurity based on AI. Its groundbreaking threat detection and machine learning capabilities are entirely based on mathematical models that can detect threats. Darktrace is viewed as one of the UK’s most successful security start-ups. Some of its founders came from MI5 and GCHQ and it has links to the maths department at Cambridge University. As the twenty-first century progresses, man and machine will become ever more inextricably linked. The UK is already embracing AI, robotics, and augmented and virtual reality with 5G connectivity, which is advancing at breakneck speed. Technology has redefined everything, from the way we communicate to the way we do business. Indeed, it is a world in which companies can grow from a staff of 3 to 300 in a couple of years. UK technology has enjoyed great momentum, with investment in 2019 touching £8.6 billion – more than twice that of any other European country.25 UK-based tech companies are attracting more venture capital funding from Silicon Valley than any other country in Europe. At the start of 2019, Forbes magazine calculated that the UK had thirteen ‘unicorn’ tech start-ups with a valuation of $1 billion or more. In addition, the UK had a growing and increasingly successful support structure that included venture capitalists, lawyers, incubators and accelerators for start-ups. The prospects look promising – with Chris Grayling, the former Transport Secretary, suggesting that Britain tends to punch above its weight. ‘We tend to miss the fact that this country is very good at technology,’ he 119

THE GREAT BRITISH REB OOT remarked, but while the potential is great, there is still much to do. A 2018 study into robotics26 argued that, while Britain was doing well, education and training policies needed to be developed to enable us to compete better with the likes of South Korea, Germany and Singapore, which lead the way globally. British manufacturers are applying new technology to their operations, but a fall-off in business investment after the 2016 referendum suggests that the UK is not leveraging the full potential of digitisation. The potential for a productivity revival is only there if our companies are not too timid in embracing investment. Too often, firms have preferred to bolster share prices and executive bonuses by paying excessive dividends and doing share buybacks rather than thinking about the longer term. The danger of prioritising dividend pay outs and rewards above prudence and investment was exposed by Covid-19 in 2020, when dividends had to be hacked back, postponed or cancelled. Perhaps the experience signalled an age of a more thoughtful and less grasping capitalism. The key to the challenge the UK faces lies in the need to maintain public spending to nurture the talent of today and encourage and inspire the talent of tomorrow. The chief executive of Tech Nation, Gerard Grech,27 has called for government support for the workforce, the education system and companies. He believes that the decline in the number of traditional jobs must be managed by retraining the workforce in innovative new businesses. This has been partly addressed by the UK Digital Strategy which pledges that all adults in England who lack core digital skills can access free basic training. He also argues that it is never too early to begin tech education, right through to university, to ensure that the next generation is creative and good at critical thinking and problem solving. Universities, in turn, must also get better at commercialising their postgraduates’ ideas, so creating a virtuous circle of new students and new businesses. Companies like DeepMind, Amazon UK and Microsoft UK see Oxford, Cambridge, UCL and the like as an innovation talent production line. 120

WHITE HOT TECHNOLO GY Finally, with start-ups scaling up faster than ever, we must ensure they have the necessary skills and support to grow, particularly outside London’s established community. According to Tech Nation data, the number of people employed in the capital’s tech industry soared from an estimated 200,000 in 201528 to 318,480 in 2018. One of challenges for Boris Johnson over the term of the 2020 Parliament will be to spread some of that glitter on the North and the rest of the country. Manchester, as the home to fastgrowing firms such as Boohoo and The Hut Group, has shown its paces, while the BBC anchored MediaCityUK is proving a success. Edinburgh is home to unicorn Skyscanner (sold to China’s Ctrip for £1.4 billion in 2016) and FanDuel. There are an estimated 25,000 people working in the tech centre, but the distribution of high-value digital jobs is very uneven. Britain has been central to the industrial transformations that have shaped the modern economy. It was the birthplace of the steam locomotive, the telephone and the world wide web, and home to the giants of science who created them. There is no reason why the UK cannot shape the future of technology, but it must get better at applying it, developing it and seizing upon a once in a generation opportunity to make the UK the most high-tech country in the world. The potential is there and innovation is all around us. The first thing the country needs to do is recognise the brilliance of the science and technology that it has and to take matters to the next level. It cannot do that if trailblazers such as smart chip maker Arm and travel site Skyscanner are ceded to overseas buyers who acquire UK technology for their own commercial benefit. That is a recipe for running on the spot and handing advantage to global rivals. The case for powering up Britain’s tech centre is even greater following the trauma of Covid-19. Never has the digital world been more important. With workers locked down at home the US Silicon Valley giants expanded exponentially. New players such as Zoom rose to instant prominence alongside the messaging application 121

THE GREAT BRITISH REB OOT Slack, founded by Cambridge University educated digital entrepreneur Stuart Butterfield. Technology has been embraced by Britain’s brilliant creative industries, ranging from video gaming to high-definition television and video streaming. The next chapter explores the value to the UK of design and creativity in all its forms.




You can’t use up creativity. The more you use the more you have. Maya Angelou, American poet Anyone who reads the daily newspapers, accesses media websites, downloads box sets from the internet and listens to music from Spotify and other sites cannot but be aware of the creativity in the UK. It rings out. It manifests itself from the street music of Tottenham to the glamour of the Oscars and the James Bond movies. These glittering successes are symbols of a much broader creative and inventive culture. They make a muscular contribution to the UK’s GDP, defy the usual rules of trading relations and, if properly supported, offer great hope for a rebooted UK. Creativity in the shape of live performances and museum exhibitions was crushed by Covid-19, lockdown and social distancing. Indeed, the future of theatre-land at times looked in peril. As an Observer headline proclaimed in June 2020: ‘The Final Curtain Call for British Theatre?’1 Sonia Friedman, producer of Tom Stoppard’s dynastic Holocaust drama Leopoldstadt, reflected that a play enjoying a sold-out run suddenly was forced to close. The economic hit from Covid-19 for a thriving theatre industry which in 2018 generated £1.28 billion in tickets sales was devastating. Friedman, together with Stoppard, questioned whether London theatre faced an existential threat. Defiant arts institutions displayed a robust determination that the show must go on. The National Theatre, among others, brought live Shakespeare to what was once called the small screen before the rise of the 60-inch 123

THE GREAT BRITISH REB OOT monitor. The Victoria and Albert Museum launched virtual exhibitions, and dancers for the Royal Ballet took part in long virtual training sessions ready for the day live performances would return. Sky temporarily moved some production to Austria and UK-based film crews decamped to New Zealand. The glory of British creativity is its resilience. Celebrated actor Bertie Carvel took the initiative and in the summer of 2020 organised a lockdown theatrical festival broadcast on Radio 3. BBC Radio 4’s everyday story of country folk The Archers – broadcasting’s longest running soap – sustained interest and storylines by the clever means of home-recorded monologues by key characters. Even if social distancing would make re-opening theatre-land a long and complex process, producers, directors and performers would find smart ways of bridging the gap until live performance could safely return. There is a tendency to see creativity through the prism of performance, art galleries, movies and recording artists. As significant as these are the sector is far broader than that. Gaming, with its embrace of AI, is a potent symbol of largely unseen achievements; an example is the Google-owned machine ‘AlphaGo’. A board game move made by AlphaGo brought gasps from an audience packed into the sixth floor of the Four Seasons Hotel in Seoul to witness a competition. The move made complete sense to the Google machine that carried it out, but it could not be deciphered by anyone else witnessing the second game of the historic Go match series in March 2016.2 The manoeuvre was to have far-reaching consequences for a tech idea that began among students in London. AlphaGo, an artificially intelligent computing system built by a small team of Google researchers, was up against South Korea’s Lee Sedol, one of the world’s top players of the ancient Chinese game of strategy. In the game Go, players take turns placing stones on a 19 ×19 grid, battling to take control of the most territory. The game is considered to be much more challenging for computers than chess. Following AlphaGo’s perplexing move, Sedol left the match room 124

CREATIVE GENIUS for a spell and needed nearly fifteen minutes to respond, but to no avail. The computer took the second game, then the third and so the series, and with it the $1 million prize money. AlphaGo, a program developed by Google’s DeepMind unit, relies on deep networks of hardware and software that mimic the web of neurons in the human brain. With these, it can learn tasks by analysing massive amounts of digital data, known as reinforcement learning. The Go match triumph was a milestone and a very public indicator of the power of AI. It gave the company a high profile and brought international recognition. DeepMind is a British start-up which had its origins in London at one of the UK’s research universities. The four powerhouses of research, Oxford, Cambridge, Imperial College and UCL, along with other Russell Group universities,3 are one of the reasons why the UK is regarded as a heavyweight in advanced scientific and digital technologies in every sphere, from pharmaceuticals to financial technology (fintech). DeepMind was formed in 2010 by Demis Hassabis and Shane Legg, who first met at UCL’s Gatsby Computational Neuroscience Unit. They were joined in the venture by co-founder Mustafa Suleyman. It may be little recognised outside the narrow confines of the tech sphere and Silicon Valley, but the UK’s research universities are centres of excellence in the development of AI, a key building block for next generation digital advances. As Russia’s President Putin has remarked: ‘Whoever leads in AI rules the world.’ AI is at the cutting edge, not just in the gaming sector but in all manner of practical uses ranging from smarter chips for the Internet of Things to pharmaceutical discoveries to financial technology – all areas in which the UK excels. Making sure that there is finance available to scale up the UK’s AI champions and that the education system is fit for purpose is vital. The UK’s future prosperity depends on nurturing ideas, intellectual property and the skills and drive that come with a population of all talents and backgrounds. 125

THE GREAT BRITISH REB OOT Other start-up nations, most notably Israel, have struggled to create digital giants. Israel is terrific at coming up with new technologies such as the autonomous driving firm Mobileye, sold to Intel in 2018,4 but it has a small domestic market and largely unfriendly neighbours, and limited domestic capital markets place it at a disadvantage. The backdrop in the UK is fundamentally different. It has a large, sophisticated domestic market, trading relations and trust that reaches well beyond the EU and has some of the deepest, most liquid global financial markets in the world. The cornerstone investors in DeepMind were an impressive group. They included the Hong Kong-based firm Horizons Ventures, an early backer of the social media site Facebook, the music streaming site Spotify and the San Francisco-based venture capital firm Founders Fund – where PayPal founder and bestselling author Peter Spiel is a partner. Other backers included the entrepreneur Scott Banister, an early adviser to PayPal, Tesla founder Elon Musk and Estonian tech maestro Jaan Tallinn, the physicist and investor behind Skype. DeepMind’s backers were global tech royalty who had no trouble understanding the importance of the enterprise and how it could transform the digital world. Sadly, among this impressive global group, substantial British investment was missing for a technology that had sprung from one of the UK’s universities. An opportunity for British venture capital to get behind an enterprise that could bring future investment, wealth and jobs was squandered. DeepMind fell into the laps of overseas venture capitalists who recognised the value of its skills and, in the blink of an eye, its future shifted across the Atlantic, far away from the labs of Bloomsbury in London’s university land. The race for future control was now on, with the Silicon Valley giants, ever alert to controlling the next big technology, vying for position. Facebook was the first to show an interest in 2013, but it was Google5 that captured the prize. In January 2014, Google announced it had acquired DeepMind for $500 million and with it the groundbreaking technology. 126

CREATIVE GENIUS Gaming is a largely unrecognised generator of wealth for the UK. Data from the Office for National Statistics shows that, overall, the creative industries contribute £92 billion of gross value added (GVA)6 to the economy each year. Britain’s creative output was the fastest expanding sector in the UK in the decade following the 2008–09 financial crisis. ‘In GVA terms, the sector produces more for the economy than the life sciences, oil and gas, aviation and automotive put together,’ notes John Kampfner, the first chief executive of the Creative Industries Federation.7 The internet opened up an ever changing variety of new smart platforms for creative expression. The value of gaining access to most intelligent technologies was recognised by Google when it took control of DeepMind. The sheer financial and technological muscle of the Silicon Valley giants ‘FAANG’ – Facebook, Apple, Amazon, Netflix and Google – is rapidly changing the creative landscape. In the search for hegemony, corporations that began by offering focused services – searches in the case of Google and online shopping in the case of Amazon – broadened horizons. They sought to become creative powerhouses in their own right. ‘Disrupters’, as they have become known, are equipped with almost unlimited finance to capture creative content. They also possess the computing power and subscriber/member bases to ruthlessly exploit their position and extend their reach. DeepMind is an example of the new technologies that are disrupting the entertainment industry as we know it. Indeed, within fifteen years of its birth the value of the gaming industry had surpassed that of the 100-year-old film sector. Remarkably, given the reputation of Hollywood for creativity, it is the UK that has become a world-class developer of video games. The global games audience is calculated to be in the range 2.2 billion to 2.6 billion people. The global software market is forecast to grow from an estimated $137.9 billion in 2017 to $180.1 billion by the end of 2020.8 The scale of the creative talent going into gaming in the UK is remarkable. New figures show that in 2017 there were over 2,000 127

THE GREAT BRITISH REB OOT active games companies in the UK inventing games for a spectrum of devices, including mobiles, tablets, personal computers and consoles. Technology is moving at a rapid pace with the introduction of VR games that reproduce three-dimensional artificial environments. The UK is also a leader in AR games that can be accessed on mobile and portable devices using pre-created environments. The most advanced development of all is the use of AI to design games that generate responsive, adaptive or intelligent behaviour, primarily in non-player characters (NPCs) similar to human-like intelligence. Among the most recognised global gaming successes for UK creative talent is Grand Theft Auto by Rockstar Games, which started out as DMA Design in the Scottish city of Dundee, better known for its cakes and the Beano comic. Since its launch in 1997, the game has become the most financially successful media product ever.9 It has outperformed cinema’s all-time best sellers, including Star Wars, Gone with the Wind and Avatar, the latter being the highest ever grossing movie, earning $2.8 billion. By 2018, Grand Theft Auto had sold over 135 million copies worldwide and netted over $6 billion in global revenues. It is the fastest-selling entertainment product ever, grossing $1 billion worldwide in just three days, becoming the top selling game of all time in the UK, generating over £240 million from more than 6 million physical copies sold – or, roughly, 3.5 sales per minute. The DeepMind and Grand Theft Auto stories are representative of a pattern of the UK’s creative genius. London-based Anglo-Swedish games group King, creator of the Candy Crush Saga mobile games beloved by commuters around the world, floated on the New York Stock Exchange in 2014, placing an initial value of $7 billion on the enterprise. A year later, the American gaming colossus Activision Blizzard stepped in with an opportunistic bid of $5.9 billion after the King share price failed to live up to its early valuation. It proved to be another example of a British creative company being snaffled by a California-based competitor in the interactive entertainment space. 128

CREATIVE GENIUS Overseas takeovers plainly have been and continue to be a threat to intellectual property nurtured in the UK, but they are not the only menace to the UK’s creative economy. John Kampfner, former chief executive of the Creative Industries Federation, has two major concerns for the UK’s future leadership in this sector. He fears that the country could pay a heavy price for the denigration and deterioration of arts education in the UK’s schools. Kampfner also passionately believes that much of the creativity – Candy Crush is a good example – is the result of collaborative efforts by brilliant young people from all over the globe. If the UK in the post-Brexit age is to continue to shine, it must remain open and be a magnet to young original thinkers and content providers from around the world: ‘The biggest single danger is skills and education. That is the single biggest killer of the sector. Other countries have adopted a cleverer approach to education. You watch them overtake,’ Kampfner cautions.10 Another big danger on the horizon are the members of FAANGS. The Silicon Valley behemoths largely started out as hardware makers (in the case of Apple) or delivery system suppliers but, as they have grown in size and reach, the disrupters have become desperate for creative content to complement their new generation technologies. Apple is considered to be a design and manufacturing company that dominates the smartphone market, but an increasing amount of its revenue comes from the sale of apps, music, games, AppleCare, Apple Pay fees and similar services. The income from these add-on services climbed 31 per cent year-on-year to $9.548 billion in the third quarter of 2018 alone. That is more than the iPad or Mac personal computers earned, and this has been the case for some time. It was the exponential growth in services that drove the value of Apple on the New York markets through the landmark $1 trillion level in July 2018, making it at that point in time the most valuable enterprise in the history of the planet. The UK, with its huge creative sector, ought to be well placed to provide creative services as a historic leader in popular music, 129

THE GREAT BRITISH REB OOT financial technology, fiction, cinema and TV productions, but nothing can be taken for granted. Seattle-based Amazon was started by the driven entrepreneur Jeff Bezos in 1994 as an online bookstore, and operated for years before making a profit. It chose, instead, to invest in ever more services, moving on to become the world’s largest internet retailer. Its growth has seen Bezos invest in video and games downloads and audiobooks with their own consumer electronics devices (such as the Kindle), and has become the world’s largest provider of Cloud infrastructure services. The ambition of Amazon is unlimited. In 2017, it invested in food retailing by buying the upmarket American chain Whole Foods. It no longer sees itself simply as a logistics company, even though it does do processing and delivery more efficiently than almost anyone in the world. The subscription service that Amazon Prime started out with a speedy and ‘no cost’ dispatch service for books, music and videos has developed a taste for delivering other people’s content. It has now become more vertically integrated, challenging traditional media with its own entertainment productions. Symbolically, in 2017 it moved its film production to Hollywood’s Culver Studios, the historic lot where several classic movies, including Gone with the Wind, were made. Amazon has an insatiable appetite for talent, with production budgets that many traditional programme makers can only dream of. It has shown no hesitation in reaching out for British talent. The danger for the UK’s creative sector is that it will become swamped by the money flowing in. The most vivid illustration of the value placed on British production capacity and technology was the bidding war for Sky, which broke out in 2018 with ‘old’ media giants Comcast and Walt Disney bidding up to £26 billion to take control. The objective was to win Sky’s programmes, technology and European reach in an effort to keep Amazon, with its sophisticated streaming service,11 at bay. In the end, it was Brian Roberts, the quiet chairman and chief executive of Comcast, who triumphed. The proprietor of the US’s largest cable company was impressed with both Sky 130

CREATIVE GENIUS technology and its studio talent. In an encouraging vote of confidence in British creativity, Sky revealed in December 2019, in the midst of the UK election campaign, that it would invest £3 billion in new film-making studios on a thirty-two acre site in Elstree. It would use the latest technology across fourteen separate stages. The decision, which involves the employment of 2,000 technicians and creative talent, was a big vote of confidence in the UK’s future as a centre of film-making and video outside the EU. Just a few months later, the UK’s powerful hold over film and video production was underlined when Blackhall Studios, an Atlanta-based company that has made movies such as Venom and Jumanji: The Next Level, announced that it would spend £150 million on British production facilities. The investment would create up to 3,000 jobs in Reading. The plans for a new complex on a University of Reading site came at a moment when entertainment groups, including Walt Disney and Netflix, were also scrambling to secure prized studio space in the UK.12 The appetite of the disrupters for British talent, programme making and content remains strong. In March 2015, Jeremy Clarkson, Richard Hammond and James May, along with producer Andy Wilman, were signed up by Amazon for a new motoring show to rival the BBC’s long-running and hugely popular Top Gear, which had been axed by the corporation after allegations of inappropriate behaviour were made against Clarkson. The trio of presenters formed their own TV company and began a three series deal for Amazon’s on-demand TV service. The Financial Times reported13 that the three-year contract would pay $250 million for thirty-six episodes, a fee unprecedented for a British TV production, with the goal of capturing 1.5 million viewers. Top Gear had previously been a big earner for the BBC, reckoned to be worth £50 million a year to the corporation through sales of DVDs, books, live shows and selling the series globally. As a money spinner, Top Gear outperformed a clutch of BBC mega brands, such as Doctor Who, BBC Earth and Strictly Come Dancing, in overseas sales. In 131

THE GREAT BRITISH REB OOT 2017, the corporation reported that BBC Worldwide was delivering over £200 million in overseas exports for a third year running. The entertainment challenger Netflix was founded in 1997 as a DVD and movies by mail service, but as technology advanced it expanded into online streaming media and video on demand (VOD). In 2013, it expanded into film and television production as well as online distribution and within five years had 125 million subscribers worldwide. The group was a big winner from lockdown and Covid-19 in 2020 when people turned in droves to home entertainment. Among Netflix’s most defining productions has been The Crown, the lavishly shot period drama based on the life of Queen Elizabeth II. Remarkably, research by the UK’s media watchdog Ofcom,14 based on a survey of 2,500 viewers, found the most watched programme on Netflix’s subscription streaming service was the comedy Friends, which originally ran on network television from 1994 to 2004 – in spite of the fact that Netflix was pumping huge sums into its original programming, spending some $6.8 billion (£5.3 billion) in 2018 alone. The hugely successful The Crown series was created by the British playwright and filmmaker Peter Morgan with a largely UK cast. The big contrast with home-grown material from the UK’s terrestrial channels was the generous budget, with the first series costing $130 million (£97.4 million), or $13 million for each hourlong episode. The Crown has been widely described as the most expensive TV drama ever produced. It led the BBC to ask: ‘The Crown: Does Netflix series cost more than the actual Queen?’15 The answer was no. The annual cost of financing the monarchy is in excess of £300 million. The willingness of the disrupters to splash so extravagantly again raised questions as to whether British studios could compete in such a rarefied atmosphere. The truth is more complicated. Establishing new media brands can be a costly exercise, but if the formula works, as it has done with the The Crown, then it is an 132

CREATIVE GENIUS investment worth making. The saving grace is that Netflix’s most revered production to date was written and directed by a British citizen, using a theme that could only be British and a cast that included the cream of the London stage. Even though the budget was provided by American finance, most of the intellectual property must be considered to be British. The UK’s strength in creating content gave birth to many of the perennial successes in the film and entertainment business. The eventual success of Sky, as a subscription broadcaster with a subscriber base of 22.9 million viewers around the world, was built on paying sizzling multibillion pound prices for broadcasting Premier League football and other global sporting franchises. Once it had an established a subscription and a pay-as-you-watch base, the price paid for sports rights then started to moderate. The UK’s strengths in producing content gave birth to many of the successes in the film and entertainment business. Pinewood Studios in Buckinghamshire – just 8 miles from London’s Heathrow Airport – is the home to the cult Star Wars movies and James Bond spy thrillers. The writer J.K. Rowling spawned an entertainment colossus with the bestselling series of Harry Potter books, which spilled over into movies made at the Warner Brothers owned Leavesden Studios in Hertfordshire, spin-off TV productions in the West End and Broadway musicals. The Harry Potter fantasy novels became global best sellers. Since they were first published by the British publisher Bloomsbury in 1997, the seven book series had, by early 2018, sold more than 500 million copies translated into eighty languages. It became the bestselling book series in history.16 Eight full-length feature films followed between 2001 and 2011, which proved to be pure box office magic. These adaptations are estimated to have earned $7.7 billion. Further, a spin-off prequel series consisting of five films began in 2016. The success of the books and films has allowed the Harry Potter franchise to expand; there are numerous derivative works, a 133

THE GREAT BRITISH REB OOT travelling exhibition that premiered in Chicago in 2009, a studio tour in London that opened in 2012 and a digital platform in which J.K. Rowling updates the series with new information and insights. Themed attractions, collectively known as The Wizarding World of Harry Potter, have been built at several Universal Parks & Resorts amusement park venues around the world. There was another jaw-dropping landmark for the J.K. Rowling industry in the spring of 2018 when Harry Potter and the Cursed Child, a two-part drama, opened on New York’s Broadway at a cost of $68.5 million, making it the most expensive non-musical play in history. ‘That’s a ton of money, no question about it, in terms of what things cost around here, but it’s Harry Potter, one of the most popular brands in the history of brands,’ Tom Viertel, the executive director of the Commercial Theatre Institute, told the New York Times.17 ‘It has a title the likes of which we would rarely, if ever, get to see on Broadway.’ If the spin-offs, such as Fantastic Beasts and Where to Find Them, The Wizarding World of Harry Potter, the Broadway production, the theme parks and assorted memorabilia, are added together, the Potter franchise is worth an estimated $25 billion (£19.2 billion). For those fluent in wizarding currency, the website Entertainment World calculated that that translates to about 52 million galleons, 11 sickles and 15 knuts.18 Great locations, production sets, stages, post-production skills and facilities have placed the UK right at the centre of global filmmaking. Pinewood Studios, west of London, has been the base for movies for decades, from big budget films to television shows, commercials and pop promos. The Rank Group owned the studio until 2001, when they sold Pinewood to a group led by impresario and television chief Michael Grade and Ivan Dunleavy. The purchase of Shepperton Studios from a consortium headed by brothers Ridley and Tony Scott gave rise to the ‘Pinewood Studios Group’, having both UK and international interest. The enlarged enterprise brought together studios spreading out from Teddington, southwest of London, to Berlin, Toronto and state-of-the-art production 134

CREATIVE GENIUS facilities in the Asia-Pacific region. In 2013, it expanded into facilities in the American South, close to Atlanta, Georgia, competing with American movie giants in their own backyard. In 2014, Pinewood received planning permission for a multimillion pound expansion at its British headquarters, which would see it rival Hollywood film sets with replicas of streetscapes and zones, and reproduce locations from the UK, Europe and the US. As well as its involvement with the Harry Potter series, Pinewood has, down the years, produced other blockbusters, such as the Bond films and the George Lucas Star Wars franchise. The 007 Stage was originally built for the 1977 Bond film The Spy Who Loved Me and is the largest in the Pinewood Group. Its other stages and studios can cater for specialist TV and film productions; it has acres of backlots where huge sets have been built, from castles to whole villages. A confident Pinewood began staging the Star Wars sci-fi series, taking over from Elstree studios where the film was originally produced. It is calculated to have brought $1.1 billion into the UK in just three years. George Osborne, the UK’s then Chancellor of the Exchequer, noted: Disney’s decision to shoot the Star Wars standalone movie Rogue One in the UK is testament to the incredible talent in Britain. This will mean more jobs and more investment. It is great news for people working at Pinewood Studios, from the set designers to the carpenters.19

The Last Jedi, which hit the silver screens in 2017 to critical acclaim, was also shot at Pinewood. ‘The Last Jedi gives you an explosive sugar rush of spectacle. It’s a film that buzzes with belief in itself and its own mythic universe – a euphoric certainty that I think no other movie franchise has,’ according to the review in the Guardian.20 Solo, a spin-off movie, was released in May 2018. Another big success for UK drama staging is the awardwinning HBO fantasy TV series Game of Thrones, broadcast in the 135

THE GREAT BRITISH REB OOT UK on Sky Atlantic, which was filmed in Northern Ireland and elsewhere in the UK with a heavily British cast over eight seasons. The finale series on HBO attracted an audience of 12.6 million on its premiere. The UK has made a long and decisive contribution to the history of rock and roll, popular music and other spin-off genres. Names like the Beatles still resonate around the world and their material is voraciously consumed and reproduced by artists everywhere. One would be hard pressed to find a holiday location, from the Mediterranean to the Pacific, where hotel or night club performers did not include the Beatles songbook in their repertoire. Britain outperformed most of its peers as a discoverer of great performers and a producer and deliverer of music to the masses through the record company EMI and its collection of familiar labels, which includes Parlophone and Apple Records. Music used to be delivered to consumers in the shape of the physical vinyl record, cassette tapes, mini-disks and CDs, but in the last decade physical recordings have gradually lost ground to digital delivery. Only vinyl enjoys a new lease of life for purist and nostalgic music connoisseurs. The contemporary music scene has been totally disrupted by technology. Over the past several decades the biggest challenge has come from piracy as rogue online delivery outfits have filched musical intellectual property and made it available online. Tough national legislation, prosecutions and technical interventions – making it harder to reproduce original recordings – drove much of the recording industry into forging distribution deals with the disrupters. The industry is now dominated by the computer streaming of songs over the internet and delivery from great subscription libraries, such as those operated by Apple Music and Amazon Prime. The most influential disrupter in music is the Swedish company Spotify, floated on the New York Stock Exchange in 2018 with an immediate valuation of $26.6 billion.21 Launched in 2008, Spotify is a music, podcast and video streaming business providing access to more than 30 million songs via laptops, tablets 136

CREATIVE GENIUS and smartphones. Spotify’s 140 million active users each month can create, edit and share playlists and tracks on social media, and make playlists with other users. Artists are paid royalties proportionate to the total number of songs streamed. By 2018, it claimed to have more than 70 million paying subscribers. The UK may have lost out to Spotify and the disrupters in the delivery space and to the American production house Universal Music at the sharp distribution end of the rock business, but it has lost none of its cutting edge when it comes to nurturing, discovering and supporting new artists and genres. The UK’s lead in creating the content for streaming, downloads and vinyl records is no accident. The BRIT School for Performing Arts and Technology is a hothouse for finding talent, including artists as successful as Adele and Jessie J. TV productions such as Britain’s Got Talent, put together by the brilliant impresario Simon Cowell, have discovered some of the greatest musical talents. Cowell’s concept has been sold to television networks in America and around the globe. The UK’s music festivals, most notably Glastonbury, have become a magnet for the best rock groups and music lovers. What is most remarkable is the variety of talent that has been found and the ability to discover new genres, as was the case in the 1960s and 1970s when the Beatles, the Rolling Stones, the Who and other British rock bands dominated the international music scene. Two of the biggest names can be found in the contrasting music styles of the singer Adele and the new London-based ‘Grime’ artists. Adele (Laurie Blue Adkins) was born in 1988 and won her first record contract in 2006, making her breakthrough two years later. The haunting lyrics of Adele’s songs describe heartbreak and relationships, and are delivered exquisitely with a style modelled on American soul. Her success occurred simultaneously with several other British female soul singers, including Amy Winehouse whose career was tragically cut short on her twenty-eighth birthday 137

THE GREAT BRITISH REB OOT in 2011 because of alcohol and drug abuse. Adele songs have earned huge sums, broken many records and gained endless awards, crucially through her exposure and popularity in America. Sell-out concerts worldwide have added to her fame and in 2011, 2012 and 2016 Adele was named Artist of the Year by the US showbiz magazine Billboard. In 2012, she was listed at number five on VH1’s 100 Greatest Women in Music. In 2012 and 2016, Time magazine named her one of the most influential people in the world. With sales of more than 100 million records, Adele is one of the world’s bestselling music artists. In 2017 alone, her earnings were put at $69 million. The grime genre occupies an altogether different segment of the music business, but is just as powerful. Grime emerged in London in the early 2000s, having developed out of earlier UK inner-city electronic music, garage and jungle. The style is typified by rapid, syncopated beats with rapping as a significant element and lyrics that often depict gritty urban life. It initially spread among pirate radio stations and the underground scene through artists such as Dizzee Rascal, Lethal Bizzle, Wiley – known as the ‘Godfather of Grime’ – Ghetts, Jme, Skepta and Stormzy. Grime provided no fewer than five No. 1 singles in 2009 – split between Dizzee Rascal, Tinchy Stryder and Chipmunk. By 2010, grime had become popular in North America. As a result, Stormzy later made it onto the Forbes Cash Princes list, which ranks the world’s top twenty highest paid rap acts, and was reported to be worth over £25 million. In 2016, Skepta was awarded one of the highest honours in contemporary music when he picked up the Mercury Prize for the album Konnichiwa at the Hammersmith Apollo in London. Grime had come of age and one of its exponents, Skepta, who started out as a DJ, became an overnight millionaire. Grime voices also became part of a divided UK’s political debate. The award-winning grime star Stormzy captured political headlines when he challenged the UK’s Prime Minister during the 2018 BRITs ceremony, asking: ‘Yo, Theresa May, where’s that 138

CREATIVE GENIUS money for Grenfell? What, you thought we just forgot about Grenfell?’22 The intervention did not endear Stormzy to conservative columnists who were concerned that a tragedy was being turned into part of a divisive national narrative. The musician’s social mission was also on display in August 2018 when he announced that he would fund two black British students to go to the University of Cambridge.23 The Stormzy Scholarship will pay for tuition fees and provide a maintenance grant for up to four years of an undergraduate course. Stormzy told the BBC that he wanted to emphasise ‘the opportunities are there’ for black kids from London’s poorer neighbourhoods, but in cultural terms it was a symbol of how an urban music genre, which had grown organically in some of London’s most deprived suburbs, had come of age and could fit in with a broader national dialogue. The contribution of rock and roll, popular recording artists and new genres of music to the UK’s creative success has never been in doubt. Individual artists such as Adele have shown skill in controlling their intellectual property by using independent studios to make and distribute their music. As in many other areas of creative Britain, following the sale and breakup of Virgin Music, EMI and other companies to overseas buyers, it is disappointing that so much of the added value in the shape of marketing and distribution now accrues to production companies outside the UK. Streaming and digital downloads now offer artists, including those who are unrecognised, new routes to the consumer. Too much of the income generated has been gifted to the digital giants rather than being reinvested in UK artists and production. The contribution of the BRIT School for Performing Arts and Technology shows how investing in the creative arts can richly pay off for the broader economy. Much of this is recognised by Ministers and top civil servants at the Department for Digital, Culture, Media & Sport (DCMS). Unfortunately, the same values are not understood or shared across government. ‘At DCMS you are preaching to the converted like you are talking to the sector. But the Treasury and 139

THE GREAT BRITISH REB OOT the Department of Education I find absolutely impossible,’ reflects John Kampfner.24 Creative Britain is not defined just by entertainment. It spills over into design and architecture. The UK’s new Design Museum in Kensington, West London, incorporating some of the distinctive features of the Commonwealth Institute it replaces, provides a fitting tribute to all forms of British design. The £83 million London edifice, created by British architect John Pawson and Dutch practice OMA, runs the gamut of the best of creativity, from high-tech devices to motor cars, high fashion and architecture. The design genius behind many Apple devices is Sir Jonathan Paul Ive KBE, an English industrial designer who is the chief design officer for Apple and the chancellor of the Royal College of Art in London. Similarly, much of the success of Jaguar Land Rover car manufacturing is down to Brit Gerry McGovern, chief design officer for the Indian owned carmaker and a board member of Jaguar Land Rover. McGovern talks of being convinced by the ability of design to transform business while enriching people’s lives.25 One of the reasons that most of Jaguar Land Rover’s R&D, design and manufacture remains in the UK is because the intellectual property and design skills are to be found here. Architecture is another area where the UK deservedly has an international reputation and reach. It too, like much of the rest of the creative sector, is a considerable contributor to the country’s surplus on trade in services. There can be few more visible, significant and creative exports, ranging from Germany’s revamped Bundestag building in Berlin (a user-friendly remodelling of the disgraced Reichstag) to the totemic Pompidou Centre in Paris. UK architects have proved to be genius at design and building solutions worldwide, with British firms (often working in partnership with local practices) being renowned for the excellence, innovation and creativity of their buildings. Among the most recognised practitioners are Norman Foster, whose buildings include the Bundestag in Berlin and City Hall in London; Richard Rogers, whose most 140

CREATIVE GENIUS recognisable buildings include the Lloyd’s of London tower in the City of London and the Georges Pompidou centre in Paris, and the late Zaha Hadid, with a portfolio ranging from the Serpentine Gallery at Hyde Park in central London to the Guangzhou Opera House in China. Other UK architects with global reputations and portfolios include the late Will Alsop, designer of the Peckham Library and the distinctive OCAD building which houses Ontario’s College of Art and Design in Toronto and David Adjaye, designer of the magnificent National Museum of African American History and Culture on the Mall in Washington, DC. From housing to educational buildings, airports to art galleries and stadia to skyscrapers, practices based in the UK are responsible for some of the most celebrated buildings and structures in the world. UK-based architects are best known for their increasingly experimental, versatile and futuristic techniques and technologies. They have become pioneers in leading edge, low-carbon and sustainable architectural design, both social and environmental, and are at the forefront of ecologically friendly, energy efficient buildings. This strength has seen UK architects establish offices overseas, in China, the US, the Republic of Ireland, Australia, Canada, Singapore, the United Arab Emirates, Malaysia and South Africa. As is the case for much of creative Britain, the success of architecture is rooted in the quality of the nation’s education, underlining why de-emphasising scholarships in art, music, design and media studies such as entertainment IT would be a national disaster. The popularity around the world of British architecture, civil engineering and design is based on its world-leading professional standards and excellence in architectural education. UK architecture schools attract the best talent from around the world. According to the 2017 rankings,26 the Manchester School of Architecture, UCL and Cambridge University were among the world’s top ten universities for architectural training. The Royal Institute of British Architects (RIBA) sets a global standard for the education of architects; its validated courses are to be found in 141

THE GREAT BRITISH REB OOT nineteen countries across six continents: from Argentina to Azerbaijan, to Chile and China. On top of that, London has firmly established itself as the architectural talent capital of the world. It boasts the highest concentration of architectural practices of any city and is regarded as a global hub of architectural thinking and teaching. In an era of fastgrowing international markets and rapid urbanisation, there would seem to be no obvious limits to the global demand for these skills and the opportunities, but there has been concern that the UK’s departure from the EU could do long-term damage to its continuing success. A RIBA report27 warned that Brexit would cut off collaboration and access to an international talent pool, and so put at risk a success story that employs nearly 80,000 people and contributes £4.8 billion to the economy every year.28 That is good reason why, in the post-Brexit age, the government needs to redouble its efforts in supporting design and architectural training, and make sure that our doors remain open to skilled would-be architects from around the globe. The reputation of London and British fashion long lagged behind that of Paris, Milan and New York. However, the 1960s and 1970s saw a renaissance of British style in parallel with the music of the Beatles and the Stones. Carnaby Street in London’s West End and the Kings Road in upmarket Chelsea became associated with extravagant, avant garde design, the use of psychedelic colours and out of favour fabrics such as velvet, more associated with Beau Brummell at the height of his fame in the nineteenth century. In the midst of this, flowering British designers Mary Quant and Vivienne Westwood (still going strong in 2020) rose to prominence. Their success was no accident. It sprung from the particular traditions of Savile Row, the home of classic men’s clothing, where cut and style was everything. It also coincided with the rise of fashion and stage design as a career choice at the UK’s art schools, now offered at many of the nation’s great universities. From relatively modest beginnings that were less than promising, British fashion has come 142

CREATIVE GENIUS to rival the other great European centres. Indeed, the most creative designers, including the late Alexander McQueen, were adopted by Parisian houses – in his case, Givenchy – which were struggling to break out of the formality and convention of their past. The scale of fashion’s contribution to the UK economy has rocketed. In 2017 it made a £28 billion direct contribution to UK GDP, up from £26 billion in 2013.29 The UK also has demonstrated an ability to conquer the world of online fashion faster than its competitors. Net-a-Porter, founded by former fashion journalist Dame Natalie Sara Massenet, became a global leader in bringing together the world’s greatest and most sought after fashion names on the web, dispatching their clothing in fabulous packaging to working women at their offices and homes. Meanwhile, the fast fashion end of the business has seen the emergence of ASOS, a company with an output primarily aimed at young adults. ASOS sells more than 850 brands as well as its own range of clothing and accessories. Its success stems from taking the styles of the fashion show runway to ordinary people at affordable prices, and in record time. In the process, the company’s market value has soared to more than £5 billion, giving it a higher stock market value than the 125-year-old high street emporium Marks & Spencer. The market research group Mintel estimated that, in 2016, people in the UK spent an impressive £16.2 billion on online purchases of clothing, fashion accessories and footwear – at the click of a button. It forecast that, in 2017, the value of sales in the online fashion market would increase by 17.2 per cent, continuing clothing’s status as the most popular category of goods bought online. The last two decades has seen the emergence of Burberry as a world-class fashion brand, distinct from its traditional background as a maker of sturdy classic raincoats with a distinctive check lining. Under the guidance of a series of fashion-savvy women chief executives, Burberry emerged from its chrysalis to become a world leader in womenswear, men’s clothing, accessories and 143

THE GREAT BRITISH REB OOT fragrances. Much of the credit must go to its British designer, Christopher Bailey, the son of a carpenter who was formerly a Marks & Spencer window dresser. Bailey acquired his skills on the cutting floor of Savile Rowe’s Gieves & Hawkes and at film and TV costumiers Angels & Berman, before finessing his design skills with a master’s degree from the Royal College of Art, London. Bailey took the traditional trench coat, reshaped it, adapted it, introduced vibrant colours and turned Burberry into one of the UK’s highest earning exporters. He rose to the very top as chief designer and chief executive of Burberry before becoming victim of shareholder disquiet in 2017. Bailey is significant because his creative skills, like those of McQueen, were a combination of the ‘cut’ learned on Savile Row and the UK’s freewheeling art and fashion school traditions. Many of the UK’s most prominent designers, including Stella McCartney, are products of Central Saint Martins School of Art and Design, the Slade School of Fine Art (an offshoot of UCL) and other UK institutions. It is to these colleges and fashion academies that innovative retailers such as online ASOS and Boohoo look to for the talent they need to nurture the UK’s fashion brilliance. A recognition of the contribution of fashion to the UK’s creative culture was the establishment of the Fashion and Textile Museum in London’s hipster Bermondsey neighbourhood. It is here that the creativity of Vivienne Westwood (a consultant to Burberry), hat designer Philip Treacey, Alexander McQueen and other great contributors to British design are now being properly recognised. It should also be noted that the fashion collection at the Victoria and Albert Museum in South Kensington is one of its highlights. Whereas Savile Row has seen off the tailoring challenges of Hong Kong and other centres in the Far East and remains a backbone of the great cutting tradition that is common to many of our best designers, flare and innovation is a product of the fine art and fashion colleges that have become a production line for designers who can, and do, take on the world. 144

CREATIVE GENIUS The UK’s broadcasters, most notably Rupert Murdoch’s Sky at that time, were among the first to recognise the intrinsic value of sport in building a global satellite franchise, which now stretches from the UK to Europe and the economically vibrant Pacific Rim. The Premier League and its spin-offs have become one of the UK’s great brands. Heroes, such as the former Manchester United star David Beckham and his spouse, the former Spice Girl, Victoria Beckham (née Adams), have become fashion icons in their own right, not just selling shirts but becoming models for the world’s top clothing brands. Trading on the Beckham name Victoria or Posh Spice, she has built her own high-end fashion empire. The ubiquitous all-conquering nature of the Premier League has turned its star players and those playing in the major European competitions into global brands in their own right. When the former Manchester United and Real Madrid footballing phenomena Ronaldo was sold to Italy’s Serie A team Juventus for €112 million in 2018, the transfer of the 34-year-old, close to the end of his career, was considered to be good business. In the first 24 hours, Juventus sold €60 million of shirts, recouping more than half the fee. As a result of marketing genius and the symbiotic relationship between Sky and other leading broadcasters with the Premier League, football has developed into a global phenomenon. If you are near a TV, computer screen, laptop or smartphone anywhere in the world, it is likely that it will broadcast top-level English football. It is watched by more people round the world than any other league, bringing with it the valuable ability to generate content that is enjoyed by a lot of people in a lot of places. In particular, the English Premier League (EPL) is the most watched sports franchise in the world.30 Formed in 1992, it generates €2.2 billion (£2 billion) per year in domestic and international television rights. In 2014–15, teams were apportioned revenues of £1.6 billion, which rose sharply to £2.4 billion in the 2016–17 season. The Premier League is broadcast in 212 territories to 643 million homes and has a potential TV audience of 4.7 billion. The 145

THE GREAT BRITISH REB OOT twenty clubs in the top flight – particularly Manchester United, Manchester City and Liverpool – earn huge sums from overseas merchandising and from foreign fans coming to the UK on hospitality packages to attend matches. The total earnings of premier clubs in 2016–17 exceeded £4.5 billion, with the Premier League itself earning almost €2 billion more than any other European league – according to the annual review of football finances by consultants Deloitte.31 In the 2016–19 TV deal, the Premier League secured £782 million per season from sales of overseas TV rights. The gap between Premier League club earnings and those in Europe’s next wealthiest leagues would have been even greater were it not for the fall in the value of the pound against the euro. From 2019, the domestic TV rights figures levelled off compared with previous deals, leading to suggestions that ‘peak’ football had been reached, but the Premier League was confident that the popularity of its product would be reflected even more in deals for its overseas rights. In June 2018, it was announced that Amazon was entering the fray, thus breaking the stranglehold of Sky and British Telecom. The digital disrupter signed a groundbreaking deal to livestream exclusive coverage of twenty matches per season. The contract allowed the Seattle-based company to exclusively show all ten matches over one bank holiday and another ten matches during one midweek fixture programme for three seasons, starting from 2019. The value of the deal was not disclosed, but Amazon said the matches would be available to UK Prime Video members at no extra cost to their existing subscription. The emergence of Amazon as a potential rival, using streaming over the internet technology, spurred Sky to invest in its own streaming service, offering viewers access to its Premier League rights for a subscription, set at £18 per month in 2018. The arrival of Amazon and the increasing interest of Netflix in sports broadcasting may prove to be costly for Sky and BT in terms of their domination of EPL broadcasting, but the English Premier League and other UK-based sports franchises can 146

CREATIVE GENIUS only benefit over the longer term from the phenomenal global interest in acquiring broadcast and streaming rights. There is a tendency to deprecate the sensational transfer fees, the surging player incomes, the commercialisation of the EPL and the increasing prevalence of overseas ownership, with several major clubs, including Manchester United, Liverpool and Arsenal, falling into the hands of owners of sporting franchises in the United States. For many football lovers, the cash windfall, the adverse impact it has had on the behaviours of some footballers rich before their time and the failings of the Premier League to support grassroots football with more resources is a huge disappointment. Nevertheless, amid the cultural debate it is easy to forget that footballers are performers, just like the stars on the sets of Harry Potter movies, and the clubs are the filmmakers. Their contribution to the national wealth and wellbeing should not be underestimated. Football has helped drive technological advance in the shape of streaming; it is a fabulous marketing gift for UK companies and sponsors and it is a contributor to the UK’s success in exporting services. Another sporting brand that speaks volumes to the UK’s skill in enhancing the value of seemingly minority interests is Formula One (FI) motor racing. Largely a British creation, it was turned into a mega brand and an international sensation by the foresight and willpower of a single-minded, meticulous, diminutive entrepreneur, Bernie Ecclestone. The origins of F1 can be traced to the European Grand Prix of the 1920s and 1930s, which gained some momentum in the 1950s, but which suffered from being largely European focused and overshadowed by its American rival, IndyCar racing, which enjoyed the benefits of the vast US market and the merchandising opportunities it created. In this battle, F1, in spite of the phenomenal support it attracted in the UK, Italy, Monaco and other venues, lacked serious traction. However, in the 1980s Ecclestone recognised the huge branding opportunities available, as well as the chance to broaden the reach 147

THE GREAT BRITISH REB OOT of the sport by moving into emerging markets in Latin America, the Middle East and Asia, and the enormous possibilities opened up by broadcasting income. Ecclestone knitted together a coterie of fragile teams into a global circus. He brought global glamour and modern technology to a sport that lacked coherence and, using great transport and logistics, forged a brilliant marketable franchise. By the 2018 season, FI had twenty-one races worldwide and nations around the world were queuing up to stage Grand Prix races and be part of the excitement. Attendances and TV viewing numbers soared. The British Grand Prix at Silverstone became one of the best attended sporting events in the country and the razzamatazz around it made it a marketing persons dream. Tobacco and liquor companies (before they were restrained) fought for advertising space on the speed machines, competing with more traditional motoring fuel and parts branding. The sport, dismissed as the province of grease monkeys and petrol heads, found favour with the celebrity culture and big business lined up the corporate entertainment. On Grand Prix days, the skies above the venues are thick with helicopters delivering corporate tycoons and their celebrity guests to the event. F1’s high profile and popularity created a major merchandising environment that has resulted in large investments from sponsors, with budgets running into hundreds of millions of pounds for the constructors. It was also responsible for encouraging engineering and electronic excellence, fuelling the UK’s reputation as an innovator in motoring technology. Many of the materials and technologies embraced by the mass car making industry owe their origins to British engineers such as the Surrey-based McLaren Group. As well as supporting a vast broadcasting, merchandising and marketing industry, FI has also created a tradition of international engineering excellence centred on the UK. The Force India team is based at the Silverstone circuit in Northamptonshire, the home of the UK’s Grand Prix. Others players are dotted around the same region. The Red Bull team is in Milton Keynes, Lotus at Enstone in 148

CREATIVE GENIUS Oxfordshire, Mercedes at Brackley in Northamptonshire, Williams at Grove in Oxfordshire, Caterham at Leafield in Oxfordshire, Marussia at Banbury in Oxfordshire and McLaren at Woking in Surrey. The concentration of motoring engineering and electronic expertise across the area has earned it the name ‘Motorsport Valley’. The hub that has grown up short distances from Silverstone is now associated with world-class automotive innovation, just as the town of Newmarket is associated with bloodstock breeding. Motor sport was a natural home for engineers who had worked on aircraft during the Second World War. Many had been based in the Midlands area where their skills base was formed. The former airfields were turned into race tracks. In the 1960s, a group of British entrepreneurs, including the Fédération Internationale de l’Automobile President, Max Mosley, started March Engineering in North Oxfordshire. They built cars for F1 and, soon after, teams such as Williams, Brabham and McLaren set up shop close by. Suppliers then arrived to service the cars and the whole shebang took off in the 1980s when satellite TV began motorsport coverage. When the Covid-19 crisis erupted in March 2020, it was to the precision engineers of F1 that Boris Johnson’s government turned to design and build a new generation of ventilators for emergency treatment in the NHS. Just how valuable and significant the F1 operation had become became evident in September 2016 when American cable television champion, Liberty Media, founded and controlled by media titan John Malone, agreed to buy Delta Topco, the company that controls F1, from private equity firm CVC Capital Partners. CVC had bought most of the Ecclestone family stake for an estimated £1 billion in 2005. Four months later, the acquisition was completed when Liberty paid CVC an astonishing $8 billion (£6 billion) for control of F1, illustrating how the value of a distinctive and popular sports franchise had soared. John Malone became the new owner and was now in charge. Bernie Ecclestone, the modern inspiration for F1 and its colourful chief executive, agreed to stay on, but it was 149

THE GREAT BRITISH REB OOT a short-lived romance with Ecclestone stepping back in early 2017. Liberty placed veteran entertainment executive Chase Carey, a former lieutenant of Rupert Murdoch at 21st Century Fox, in the driving seat. He was charged with the next stage of F1’s development. With the embrace of digital broadcasting technologies, the new owners had a solid platform to build on. F1 rakes in large amounts of cash from TV rights, fees for hosting races, sponsorship and merchandising. In 2017, F1 generated around $1.6 billion (£1.2 billion) in commercial revenues, of which $700 million (£538 million) was distributed to the teams. Roughly half of this cash resource was shared equally between F1 teams, with the other half allocated according to where the team finished in the championship. On top of these commercial revenues, individual teams can bring in their own sponsorship, merchandising and corporate revenues. Typical of today’s teams, Lotus Formula One is a big operation employing over 400 people.32 Lotus remains an emblematic British brand, but it has been through several layers of ownership, including the French car giant Renault. In 2009, the French car maker sold a majority stake to the Luxembourg-based technology fund Genii Capital. It, in turn, brought in new investors including the Abu Dhabi royal family. The annual budget for competing in the F1 calendar is around $200 million (£130 million) to put two cars on the track. ‘Motorsport Valley’ has become an unrivalled centre of engineering expertise with around 4,000 motorsport companies based there, employing around 40,000 people. That represents around 80 per cent of the world’s high-performance racing engineers. To support this, the government supplies funding and incentives to encourage individuals and companies to push the boundaries of innovation in engineering. The government recognises the contribution that high-performance, technical excellence brings to the UK. The creative industries, from broadcasting to F1, reach far beyond the celebrity culture much loved by most of the media and the public. Their creativity is a driver of technology and innovation. 150

CREATIVE GENIUS It is hard not to be aware of the UK’s creative sector. It touches all of our lives each day as we turn on the radio in the morning, load up our iPhone with music before going to the gym or settle down on the sofa to watch a Sky or BT broadcast of the next fixture of our favourite football team. Defining the boundaries is difficult. Companies like Sky have spawned valuable new technologies as they seek to remain globally competitive. F1 motor racing has proved to be both a sporting and merchandising phenomena, as well as magnet for the world’s best high-performance engineering. Creative individuals such as Adele in music, J.K. Rowling in fantasy fiction and David Hockney in contemporary art have, in their own lifetimes, generated global creative incomes for the UK. Geeks sitting in front of laptops and gaming consoles have provided the fodder for multibillion-pound companies. However, it is only in the last decade that the leaders of the UK’s creative sector have recognised that they needed to come together as an industry if they were to gain the kind of recognition they required from Whitehall and the government. Among the initiators was John Sorrell, head of the Design Centre, who in 2018 took over as chief executive of the Creative Industries Federation. Others include Amanda Neville, who runs the British Film Institute, and Tony Hall, who moved seamlessly from the Royal Opera House back to the BBC from whence he came.33 The objective is to have a voice at the table. History dictates that the car makers, the big pharmaceutical companies and finance, as well as other sectors, have enjoyed unlimited access to Whitehall. This privilege had previously been denied to the creative sector. This is partly because of its amorphous nature and the way in which artists and creative talents freewill. There is a failure to understand, perhaps, that the gaming geek is as much a part of our modern culture as the National Theatre. What we do know is that fourteen separate sectors of the economy have signed up, ranging from architecture to advertising and popular music, as well as publicly funded, subsidised theatre. 151

THE GREAT BRITISH REB OOT In my own conversations with leading figures in the creative sector I have reached the conclusion that, certainly when it comes to artistic endeavour, Brexit is not seen as a difficult problem. Agents making deals for literary figures do not think in terms of national boundaries or trading blocs. It is about getting the best deal for their creative clients. Architects are just as likely to receive commissions from Asia and North America rather than Europe. That does not mean the needs of the sector can be ignored. Intellectual property is continuously under threat and the UK, because of its open approach to overseas takeovers, ought to be acutely aware of the need, wherever possible, to build on what we have. It is in the public interest that the authorities scrutinise the value in a gaming company or record producer with the same degree of thoroughness that they would a defence contractor. After all, intellectual property is the lifeblood of the modern digital economy. Even though the UK has a robust financial sector it has been appalling at backing our own champions, which is why companies like DeepMind end up in the hands of digital giants such as Google. The only saving grace is that, because of the UK’s dynamic creative impulses, most of the digital giants are building European headquarters and vast new campuses in the UK. The attraction for them is design and creativity. In every generation there is genius who arrives organically and cannot be nurtured, but the reality is that much of what the creative industries do so well is the result of investment in education, ranging from art and drama colleges to great research universities. There is a view, fostered by Conservative politician Michael Gove, the late Sir Christopher Woodhead, former head of the Office for Standards in Education, and others that the fault lines in our education system have been wrong. The core values of education are now focused on the English baccalaureate (EBacc), which was introduced in 2010. Under this set of standards, schools were made to focus on, and young people were examined on, the essentials of English literacy, mathematics, science, history or geography, a 152

CREATIVE GENIUS language and the classics. A 2017 study by the Sutton Trust, quoted on the GOV.UK website, claimed that EBacc can help improve a young person’s performance in English and maths. Research by the UCL Institute of Education, quoted on the same website, shows that taking the EBacc enhances prospects for entering further education and employment. Clearly, maintaining and improving standards is critical in advanced societies. The notion that a focus on the basics can or should be to the detriment of sport, music, media, fine art and design is seen by Kampner and others as a fundamental error. This will weaken the intellectual base of the nation. The basics are critical, and maths are an important ingredient in, for instance, the coding behind the gaming sector but, whereas coding is a mechanical activity, it is imagination, vision and design prowess that is responsible for the creative industries becoming the fastest growing sector of the economy since the financial crisis. It is a message that is still hard to get across in the discipline-focused Department for Education and the budget-conscious Treasury. What is not properly recognised is that the often disparaged ‘Mickey Mouse’ degrees, arts colleges, and IT entertainment and graphics skills are largely responsible for driving the UK’s brilliant creative industries. Underpinning liberal arts education at primary, tertiary and college levels ought to be a critical goal. The fashion academies have, for example, demonstrated how less academically gifted young people can develop the skills that have driven the growth of digital fashion pioneers and new designer brands. Brexit does raise a whole series of technical questions about who and how the UK is represented at global negotiations on intellectual property, non-tariff barriers to trade and other issues, and those will need to be addressed. What is important is that leaving the EU does not lead to the funds flowing into our great universities and colleges being reduced. Indeed, this is the moment when government and business needs to focus on stepping up spending in R&D and education – that is the only way our creative industries 153

THE GREAT BRITISH REB OOT can prosper. However, the funding of creative industries is not without critics. Some analysts question why arts enterprises such as the National Theatre in London garner big taxpayer support while core strategic industries, such as steel, do not have the same automatic access to government funds. The BBC licence fee raised £3.7 billion in the 2019 financial year.34 The scale of the licence fee privilege, which the BBC enjoys regularly, has become an issue for public debate at times of political upheaval. Accusations of political bias from both sides in the EU referendum debate are a constant feature of discussion. The BBC has been accused of taking a one-sided view on big issues such as climate change and in its reporting of Israel–Palestine issues. Commercial rivals accuse it of unfair competition, yet the high quality of its output generates a big source of income and prestige for the UK. American audiences regard BBC period dramas, recycled on Masterpiece Theatre, as the gold standard. Similarly, in its documentary output, the BBC is capable of producing programmes that would never see the light of day on commercial channels or in the new world of Netflix. In January 2020, on the seventy-fifth anniversary of the liberation of the Auschwitz concentration camps, the BBC broadcast a series of outstanding documentaries. The output included a brilliant portrayal of the UK’s role in rescuing traumatised children from the Holocaust and acclimatising them at Windermere in the Lake District.35 As with any publicly run organisation, it is only too easy to criticise the BBC; however, it does much, critics would argue, that exceeds its public service remit. Nevertheless, it remains a vital part of the training and creative infrastructure that inspires creative industries in a variety of directions. The economic challenge from North America and the technological challenge from digital entertainment is formidable, but dismantling the current arrangements by introducing a subscription service could only weaken the architecture of UK creativity. As the UK sets out on a new path, ways must be found to ensure that collaborative efforts between British and overseas researchers, 154

CREATIVE GENIUS young tech innovators and creative partners and their European employees are not undermined. The points system introduced by Boris Johnson’s government in 2020 will be part of that. Encouraging a welcoming atmosphere and making sure that the necessary resources are available will be required to take UK creative industries to the next level. Freedom from European rule-making and a broader global outlook could be enormously beneficial. That means underpinning them with investment, nurturing our arts institutions and recognising that sports is not just a frivolous entertainment for the few, but a driver of audiences and income. The BBC, Sky, sport and the government support the arts as significant contributors to an economy increasingly driven by creative services. A much wider range of new creative industries have replaced the more traditional notion of ‘cultural industries’, seen to describe theatre, dance, music, film, theatre, the visual arts and the heritage sector. Creative industries not only depend on the creative talent of individuals; they also depend on the generation of intellectual property – and we need more of it. Harnessing the potential in all these genres will be critical in building on a sector that accounts for an estimated 10 per cent of the UK economy, which is expanding exponentially across the globe. I have long believed that if the UK is to remain a leader in this world, we need to be far better prepared for changing the shape of leisure and entertainment. The scale of the challenge is enormous, but the general public needs to understand the contribution their favourite artists make to our prosperity, and we need to have businesses that are brave and bold enough to exploit them. The sale of creative enterprises such as EMI records to private equity firm Terra Firma in May 2007 was a disaster. When the deal went wrong, music production fragmented and a back book, which included many of the UK’s groundbreaking performers, including the Beatles, ended up in the hands of overseas record labels. There is little recognition of the value of UK produced creative and media content, and investment needs to be encouraged through public awareness campaigns and tax breaks. 155

THE GREAT BRITISH REB OOT The direct impact of being out of the EU should be limited for the creative sector, as can be seen from the new American investment that is pouring into UK film production. The UK media watchdog, Ofcom, currently regulates around 1,200 TV services, but almost a third of those do not broadcast to UK viewers. They are based in the UK because of creativity, ownership and technical resources. As a member of the EU, the ‘country of origin’ rule says media outlets can serve the whole of the EU as long as they abide by the rules of their host country. There is no reason to think that there will be huge divergences of regulation outside the single market, unless barriers are erected in the hope that some of the investment lands back on the Continent. According to Arts Council England (ACE), funding is also an issue for those English arts organisations who received £345 million from the EU between 2007 and 2016. Unlike farming and university resources, there have been no specific promises that this money will be repatriated to the arts by the UK authorities. This could make a difference to the economics of smaller, regional arts entities. It could impinge on creativity since international success is also built on the output of regional groups. The academy award-winning film The Two Popes, made for Netflix, directed by Fernando Meirelles and written by Anthony McCarten, was adapted from McCarten’s play, The Pope. It premiered at the Royal & Derngate theatre complex in Northampton in 2019, where the director is James Dacre.36 The UK’s network of functioning regional theatres stage and produce original works which may then move to London’s West End, and even end up in a globally distributed movie. This is a symbol that creativity is alive and well at the grassroots level. As has been the case with much of the UK economy, Covid-19 and lockdown has had a destructive impact, particularly on live performance and sporting events. But with so much of the value created in the sector online and digitalised it emerges from the pandemic less scared. Indeed, gaming, listening to music and


CREATIVE GENIUS subscription television broadcasters such as Sky have attracted new adherents. The value of the creative sector when disconnected from celebrity and sporting prowess is often not fully recognised as the economic workhorse and export champion it has become. Europe is an important market, but the English language means that it has a reach far beyond the Continent, from North America to the Pacific and Australasia. By contrast, the value and significance of the City of London and the UK’s financial sector needs little introduction. It is a source of both opprobrium for its role in the 2008–09 financial crisis and admiration for the wealth it creates for UK plc. It too benefits from the software and coding skills coming out of the UK’s universities, and financial technology (fintech) is, as we will see in the next chapter, the next frontier.




The propensity to truck, barter and exchange one thing for another is common to all men, and to be found in no other race of animals. Adam Smith, The Wealth of Nations, 1776 When the financial crisis hit the Royal Bank of Scotland (RBS) in the autumn of 2008, Ron Kalifa, a quietly spoken boffin, was working in the bowels of the bank with a mission to turn the group created by disgraced banker Fred Goodwin into a payments powerhouse. Although RBS had expanded the enterprise by bringing together several retail payments brands under the RBS Worldpay banner – including Streamline and similar companies in the Netherlands and the US – the Harvard Business School alumni was struggling against the odds. RBS’s chief executive, Fred Goodwin, was more interested in building his Edinburgh folly headquarters at Gogarburn outside Edinburgh than investing in the up-to-date information technology that Worldpay – a provider of the software, equipment and risk management behind credit card transactions – needed if it was to develop into a global champion. In March 2019, just a short decade later, the fintech leading company that Kalifa eventually created was sold to a leading US financial technology company, Florida-based Fidelity National Information Service, for an astonishing $43 billion (£33.1 billion). The fintech enterprise that had been buried inside RBS and sold by Goodwin’s successor, Stephen Hester, to private equity buyers Advent and Bain in 2010 for £2 billion was valued more highly than the Royal Bank of Scotland, owner of NatWest and much more. 158

THE MONEYTREE The sale was an enormous triumph for Kalifa and his colleagues who persuaded the new owners to plough £1.5 billion into new, more advanced and faster technology before floating the company on the stock market in October 2015 for £6 billion. As a public company, Worldpay merged with an American rival, Vantiv, thus acquiring a huge portfolio of new American clients and becoming one of the biggest payments providers in the world. The rise and rise of Worldpay out of the embers of the financial crisis is a parable of how Britain’s leadership as the originator of the financial technology now drives the global banking system. The very same acumen and trading skills that made the City of London the biggest exporter of financial services on earth is now turning it into a fintech champion. The Worldpay saga says a great deal about the skill set and culture that has made financial services the most valuable wealth-creating sector of the UK economy. The company’s release from RBS was in many ways an accident of history forced by EU demands that the bank shrink in size after it was bailed out by the UK government. Freed from RBS, the strengthened management of Kalifa and chief executive Philip Jansen1 was able to access the private equity market, which is a key part of London’s financial landscape with many of the big American funds, welcome in a way not possible in the more protectionist France and Germany. Private equity companies are sometimes accused of buying companies, loading them up with debt and then dumping them on an unsuspecting public. There are plenty of those examples around, but in Worldpay’s case it allowed the firm to access capital and financial management skills not available to it at RBS. After the firm had been rebuilt, the London Stock Exchange (LSE) proved a fertile place for fintech start-ups, and others have followed. Institutional investors and asset managers saw the advantage of what was billed as a merger of equals with US payments firm Vantiv. Kalifa believed that the deal was needed to give Worldpay access to the American market but, significantly, the share quote 159

THE GREAT BRITISH REB OOT and much of the expertise was in London. The UK’s generally open attitude towards overseas takeovers allowed Vantiv and then Fidelity International Information Services (FIIS) to make their bid without barriers. I have long had serious doubts about the wisdom of overseas takeovers and the loss of corporate headquarters, patents and R&D, and the innovation skills (developed in the UK) that go with them. Indeed, it would be better if UK investors and the venture capital industry were more willing to invest for the long haul and take enterprises such as Worldpay to the next stage of development, but it is also true that when one fintech company goes another springs up. Ron Kalifa, having stepped down from Worldpay after the FIIS takeover, took on the role of chairman at Network International, a Dubai-based payments group focused on the relatively unexplored territories of the Middle East and Africa. It should come as little surprise that the UK is becoming a pioneer in financial technology. Indeed, the South Bank of London is littered with hundreds of fintech start-ups. These companies feed off the IT skills of the UK’s universities, the buzz of the City of London and the knowledge that our bigger financial institutions need technology or they die. The chief executive of Barclays, the American investment banker, Jes Staley, once confided in me that some 75 per cent of his time is, in one way and another, tied up with technology issues. Several clusters of expertise are already evident. The UK is the home to comparison websites that offer consumers and businesses easy access to financial services, be it insurance or asset management. The regulators have helped create an environment attractive to internet banking start-ups such as Atom, leaving the high street banks playing catch up. The UK is also host to peer-to-peer lending groups such as Funding Circle, crowd funding, web-based stockbroking and wealth management. In the aftermath of the financial crisis it also, less honourably, pioneered digital payday lending. The attraction of these web-based financial enterprises is that they are not confined by national boundaries and trading blocs, 160

THE MONEYTREE but reach across the globe. Rules and regulations in finance are determined on supranational level through the Financial Stability Board, an outgrowth from the formation of the G20 after the financial crisis, which provides the opportunity for innovation. As with the Silicon Valley digital giants, fintech knows no borders. It does, however, provide challenges for regulators and fraud prevention technologies, leading to the creation of a burgeoning new service industry of cybersecurity. There can be few UK institutions that have demonstrated the robust survival skills of the City of London. Over the centuries it has faced the greatest of challenges: from the Great Fire of London in 1666 to the South Sea Bubble of the early eighteenth century which caused the ‘mother of all’ market crashes; from the moment in 1931 when the gold standard, pegging the pound to gold, was abandoned and our currency collapsed; to the Second World War campaign of destruction by the German Luftwaffe. In more modern times, it has shrugged off the IRA bombings of the 1970s, Ted Heath’s three-day week, the sterling crises of the late twentieth century and, of course, the great financial crash and recession of 2007–09. In 2020, London was also at the epicentre of Covid-19 in Britain. The financial community adapted smartly by using home working technology. The banks were pressed into action through a series of loan schemes designed to support small- and medium-sized enterprises (SMEs) and tens of billions worth of loans2 designed to keep commerce up and running for when lockdown was ended. The Bank of England operated a separate low interest rate plan to support big corporate borrowers, such as the airlines, with a recognised credit rating and a critical role in the British economy.3 High street banks were provided with more capacity to lend when the Bank of England allowed them to release ‘buffer’ capital accumulated since the financial crisis. Being part of the system to rescue the economy came at a cost. The Bank’s regulatory arm – the Prudential Regulatory Authority (PRA) – wrote to each of the 161

THE GREAT BRITISH REB OOT banks requesting them not to pay dividends to shareholders or bonuses to senior bankers unpaid from 2019 or generated in 2020 during the coronavirus and lockdown emergency.4 The rulings generated gripes from bank boardrooms and shareholders, with Hong Kong investors in HSBC the most vociferous. But there was a recognition that the last thing needed in the financial community was another banking crisis after the searing events of 2008. The City’s story is an extraordinary one of survival and, yes, prosperous growth in the face of continual threats to its physical and commercial existence. Whatever has been thrown at it, the City has simply become more and more important to our national prosperity. However, critics have argued, and still do, that the dominance of finance is a destructive force and that a more balanced economy with more emphasis on manufacturing is needed. There is clearly some truth in the need to re-establish the UK as a manufacturing force, particularly in high-tech, robotics, communications, battery technology for electric vehicles and much more, but that does not have to be at the expense of the City – or the Square Mile as it is sometimes known – but alongside it. As a financial journalist, I have chronicled the ups and downs of the Square Mile for more than forty years. For much of that time I was broadly supportive of the European project, largely because it has kept the peace after the horror of the two world wars and because sensible trade cooperation ought to benefit us all. Increasingly, I came to despair at the economic and financial folly of trying to knit twenty-eight diverse economies and political systems5 closer together amid national resistance, cultural differences and inadequate institutional arrangements. The more I have observed of the stifling economics of the EU, the financial incompetence of the eurozone, the fetid state of the European banking system and its sloppy and ill-conceived decision-making, the more convinced I have become that the City, with its global outlook and status, could prosper as well outside the EU than as part of the EU trading block. 162

THE MONEYTREE One of the central arguments made by former Prime Minister David Cameron during the 2016 in–out referendum campaign was how leaving the EU would cut off our access to a market of 500 million people. Certainly, as we subsequently learned, it would cause difficulties in supply chains. This was particularly so for the highly integrated car industry where companies such as Nissan, based in Sunderland, relied on just-in-time production processes, which required uninterrupted access to components from Europe and around the world. What Cameron and other advocates for staying part of the EU failed to note was that the market of 500 million was deeply dysfunctional and had been stagnating. Moreover, the UK’s most important export to the EU, financial and professional services, is uncovered by trade agreements, although subject to common prudential arrangements. As Nobel Prize-winning economist Joseph Stiglitz has written: ‘GDP per capita (adjusted for inflation) for the eurozone – the countries that share the euro as their currency – was estimated to be barely higher in 2015 than it was in 2007. Some countries have been in depression for years.’6 In spite of the concerted campaign by business groups such as the employers’ organisation, the CBI, to convince everyone that leaving the EU would be a disaster, the chairpersons and chief executives I speak to on an almost daily basis – from some of the largest businesses in the UK – rarely suggest we would be worse off. The European market is still hugely significant for them, but the world has moved on since the UK joined the EU and much of the investment and expansion is focused on faster growing emerging markets. The truth is that in times of strife and turmoil, such as the eurozone crisis that blew up in Greece in 2009, which still has to be fully extinguished, the City, with the superior financial services it provides, has become even more vital to Britain and to the world’s economic health. For many groups of international traders, its free markets offer an escape from the stifling tax and regulatory systems that exist in so many other countries. Indeed, the UK has often faced 163

THE GREAT BRITISH REB OOT anti-City measures being imposed by Europe, which has long been inordinately jealous of London’s financial success. These damaging actions have included EU-imposed red tape on free market activity, such as the short selling7 of stocks and shares and regulations that restrict bank bonuses.8 Hedge funds were accused by critics of fomenting the financial crisis and weakening the banking system in Britain and on the Continent during the time of most peril. France assiduously courted the financial sector after the EU referendum. It had some success. In early 2020, the biggest beast in American banking, J.P. Morgan, acquired a building in Paris and vowed to staff it up with hundreds of traders. It was a brave move by J.P. Morgan, in a country where regulators make life uncomfortable for the finance industry. Among those that have been punished by the French authorities are the activist investors Elliott Management and short sellers Muddy Waters and Bloomberg, which allegedly published a report based on a fake press release.9 The reality, though, is more complex than that. The credit analysis by short sellers, hedge funds and activists is simply sharper and better-informed than that of stockbroking analysts (who are in the business of recommending shares to buy) and regulators. Personally, I recall my visit to the London-based fund CQS, headed by the brilliant Australian financier Sir Michael Hintze, as the scale of the financial crisis was unfolding. He introduced me to one of his credit experts who had assiduously examined the sub-prime assets on the books of several of the UK’s second line consumer/ mortgage banks and concluded they were bust. On that basis, CQS and other hedge funds sold the shares short. Far from being the ‘locusts’ – which was part of the German narrative – the short sellers were the ‘canaries in the mine’ alerting other investors and regulators to the crisis ahead. In other words, they were an important part of the price formation process. The UK is the world’s second largest centre for hedge fund management after New York. London’s Mayfair, an area once dominated by advertising agencies and corporate headquarters, is 164

THE MONEYTREE now ‘hedge fund central’. Some $414 billion (£319 billion) of assets are managed from behind the discrete brass plates of the area’s town houses and offices. Britain is also Europe’s largest home to hedge funds and the associated services that come with them – including prime brokerage, custody and auditing. It should come as no surprise that when the hedge funds came under attack from Brussels and Frankfurt, the then Chancellor of the Exchequer, George Osborne, resisted. Similarly, the UK government opposed EU efforts to restrict bonuses to bankers to two times salary. As politically satisfying as it might have been to see the fat cat bankers punished, the UK and the City saw it as placing the UK financial sector at a disadvantage to third country financial sectors such as those in New York, Tokyo and Hong Kong. Historically, Frankfurt and Paris have campaigned for additional EU regulations and taxes on the City, which would slow commerce and make their own financial centres more attractive business propositions. However, the City’s overwhelming global influence is shown not only in the myriad of foreign financiers who work there, but also in its geographical expansion. Whereas it was once confined to the Square Mile – technically, still the definition of the City of London – its financial services have moved not just east to London’s Docklands and the sprouting towers at Canary Wharf, Stratford and beyond, but also to the west where they occupy offices in Mayfair and the West End, the home to private equity and venture capital firms as well as hedge funds. The City is the biggest generator of income for the Exchequer and the leading exporter of financial and professional services to the world, worth some $107 billion (£82 billion) per annum. This is almost twice the size of the US, the second largest exporter of similar products.10 In some respects, the great three pillars of the Square Mile – the London Stock Exchange (LSE), Lloyd’s of London and the Bank of England – remain as dominant in global financial affairs today as they did when they first emerged out of the coffee houses and early banks of the seventeenth century. 165

THE GREAT BRITISH REB OOT The role of the LSE has changed from simply being a platform to trade shares to being a creator of share indexes – which are traded by investment funds – to being the leading global market for natural resources stock. It is also a big repository of valuable financial data. Its status is such that, over the last two decades, it has received takeover bids from all parts of the world, from New York to Germany to Hong Kong. All have been repulsed. Lloyd’s is still the ‘go to’ market for maritime and higher risk insurance and attracts investment from syndicates across the world. The prestige of the Bank of England as the enforcer and monitor of the world’s largest foreign exchanges and the biggest home to overseas banks ranks very highly. The City today remains the world’s primary financial centre, a role it cemented through the nineteenth century when the British Empire was at the height of its pomp. The ability to reinvent itself every generation is a huge tribute to the ingenuity and entrepreneurship of the merchant workforce attracted to its trading floors from every corner of the earth. Standing at the heart of the Square Mile, and hidden behind architect Sir John Soan’s massive curtain wall, the Bank of England has a heritage dating back to 1694. It stands alongside the Federal Reserve in Washington and the European Central Bank in Frankfurt – with the Bank of Japan in Tokyo not far behind – as one of the most influential central banks in the world. Its status partly reflects its history and Britain’s place as the world’s fifth largest economy but, more properly, its power stems from hosting one of the great financial centres. In the years since 1997, when it was granted operational independence by the then Chancellor of the Exchequer, Gordon Brown, the changes at the affectionately known ‘Old Lady of Threadneedle Street’ have been manifold. The vision of Brown and his top economic adviser, Ed Balls, was of a monetary institution and intellectual powerhouse with the same kind of clout as the German Bundesbank prior to the creation of the European Central Bank (ECB). The architect of this 166

THE MONEYTREE transformation was the Bank of England’s governor, Mervyn King, an owlish and illustrious economist with an uncanny ability to explain difficult economic and financial concepts in an understandable way. Brown and Balls took the view that, in order to focus on lowering inflation, the Bank did not need the distraction of supervising the banking system, although it retained some overarching but ill-defined, responsibilities for maintaining financial stability. The financial crisis of 2007–08 exposed the flaws in split regulation between the Bank of England and the super regulator, the Financial Services Authority. The Conservative–Liberal Democrat coalition government of 2007 recognised that the system was not fit for purpose and restored the primacy of the Bank in policing significant financial institutions and maintaining financial stability, as well as underpinning its monetary role. On the retirement of Lord (Mervyn) King in June 2013, for the first time in the Bank’s history the handpicked occupant was plucked from overseas, the Canadian Mark Carney. As governor, the former Goldman Sachs banker and governor of the Bank of Canada had earned an enviable reputation as one of the few Western central bankers to have successfully navigated his country through the financial crisis without a failure in the banking system. He was subsequently chosen to head the Financial Stability Board (FSB), established at the Group of 20 London summit in 2009, to develop rules and regulations designed to make the global financial system safer. The combination of Carney’s role as chairman of the FSB and a greatly empowered Bank of England made him one of the most authoritative voices in global finance, and conferred on the Bank the status befitting an institution that bestrides the City of London. Carney’s status was further enhanced by his surefooted response to Britain’s vote to leave the EU. However, Brexiteers saw him as having been overly friendly to the Remain campaign. Critics also point to the failure of his early policy of ‘forward guidance’, designed to provide confidence to consumers and businesses on the direction of interest rates. It was 167

THE GREAT BRITISH REB OOT this policy and failure to deliver predictable interest rate policies that led him to be labelled the ‘unreliable boyfriend’. Irrespective of the politics, the Bank under Carney’s leadership demonstrated itself capable of dealing with banking crises – such as that at the Co-op Bank – when they arose and as a powerful voice on the international stage. Speaking in 2019, Carney noted that the system he had presided over at the FSB had demonstrated the value of ‘supranational rules’ that permit national approaches. ‘These FSB reforms create a platform,’ he said, ‘for cross-border financial services between different legal systems and regulatory approaches that achieve similar outcomes for financial stability.’ In effect, the central banker, accused by leave supporters of being overly friendly to the EU, had become an advocate of an approach that looked beyond the EU and other trading blocs. He also gave succour to the judgement that the person who followed him from office in March 2020 (after three postponements of departure) would, like Carey, need to be of a similar international standing to match the prospects of the City. In the event, in December 2020 the government opted for a more conventional choice in Andrew Bailey, a Bank of England lifer who had spent three years running the City regulator, the Financial Conduct Authority. The appointment was announced by the then Chancellor Sajid Javid in the ‘Churchill’ room at Her Majesty’s Customs and Revenue. It was deemed an appropriate place because it was in the very same room that Labour Chancellor Gordon Brown had unveiled the Bank’s independence in 1997. Bailey had been careful throughout the UK’s heated exchanges over its future membership of the EU to hold a public silence on the matter. He had diligently gone about the task of aligning UK and EU regulation. Privately, Bailey was understood to take a benign view of Brexit, arguing that the City had been through change before and would come back stronger. He was of the opinion that even if there was a migration of financiers to the Continent the gap could be filled by the rise of the fintech sector. 168

THE MONEYTREE As Britain seeks to find itself after the Brexit upheaval, the Bank’s global position and its job of keeping tabs on risks across the global system will need to be enhanced. The Bank demonstrated post the financial crisis and the EU membership referendum that it has the skills and tools to see the UK through financial traumas. These talents will become ever more important as Britain sets out on a new and uncertain political course. The next crisis was never likely to be predictable or the last, and in many ways it is unlikely that the issues the Bank’s financial policy committee had been closely monitoring, such as the build up of leveraged corporate debt, would be the one to trigger the next market meltdown. No one could have seen the interruption to global supply chains and the havoc on financial markets caused by Covid-19, which swept out of the city of Wuhan in China in early 2020. It was a trauma that required Andrew Bailey to dig deep to preserve stability in the markets, which he described in March 2020 as ‘bordering on disorderly’. It is imperative that Britain, with its exposure to risk through the City, has robust regulation that does not get in the way of the free and competitive marketplace for financial and professional services that has delivered outstanding prosperity. The LSE also traces its history back to the seventeenth century and the coffee houses which then, as today, were the great meeting places for commerce. In an earlier age, the coffee houses were the places where the merchants gathered to raise funds for great domestic and overseas ventures. In the twenty-first century, the coffee shops have re-emerged as working environments for networking and writing some of the code for the financial technology that will change people’s lives. A vibrant equity market capable of raising new capital is also an essential part of the City’s architecture. Over the last two decades there have been many attempts by rival exchanges from all corners of the earth to bid for and take control of the LSE, but it has resisted all approaches. The last divisive approach came in March 2016 in the shape of a proposed ‘merger of equals’ with Frankfurt’s 169

THE GREAT BRITISH REB OOT Deutsche Börse in an attempt to create a joint exchange valued at £21 billion. The odds were always stacked against the deal, which unravelled amid Frankfurt regulatory concerns about share dealings by the proposed new chief executive, Carsten Kengeter, and an unwillingness by the German authorities to take on the risks of derivatives clearing, but the final blow was dealt by the EU competition authorities. As a result, London’s position as an independent world leader in equity trading was preserved. The LSE had also developed into a powerhouse of data through its Russell Investments arm, which created many of the stock indexes that were tracked by fund management organisations. At the end of 2017 there were 428 foreign companies listed on the LSE, which accounted for 12.4 per cent of global listings, behind the New York Stock Exchange and the Wiener Börse, home to many Eastern European listings.11 Among the strengths of the LSE has been its ability to attract natural resources companies from every corner of the world, including most of the fast-growing BRICS economies – Brazil, Russia, India, China and South Africa – as well as several frontier states. The lightly regulated Alternative Investment Market (AIM) is the home to many new players, including new consumer goods companies such as the tonic maker Fever Tree, tech innovators from Israel and a host of financial technology firms. Brexit uncertainty, without doubt, put a dampener on IPOs in 2017 when just £9.7 billion of new money was raised, but trading on the LSE remains brisk and London accounts for 5.2 per cent of global equity market values. At the end of 2017, the UK had one of the highest equity market capitalisations in the world, equal to 170 per cent of total output (GDP). IPOs may have stalled, but the UK’s dominance of bond trading, partly exercised through the LSE’s control of Borsa Italiana, remains intact. At the end of 2017, the UK’s issuance of global bonds was the largest in the world at $3.2 trillion (£2.5 trillion), a sum equal to 13.3 per cent of global GDP. 170

THE MONEYTREE Eurobonds, foreign currency debts issued outside the native country of the borrower, accounted for 63 per cent of the issuance. Meanwhile, some 37 per cent of global trading in bonds went through London. The leadership of London in bond trading offers a stunning insight into how Britain has benefited down the centuries as an offshore financial centre, taking advantage of opportunities presented by regulatory and tax rules elsewhere. The shift of bond fund raising from New York to London was largely a consequence of a tax regime put in place by John F. Kennedy’s administration in the 1960s. Once bond trading switched to London, so did many of the global investment banks and the next big growth area in finance – ‘syndicated loans’ – whereby groups of banks came together to finance big loans to major corporates and sovereign nations. The Eurobond and the syndicated loans market still represent an opportunity for the UK. Further, stifling financial regulation of the kind favoured by the EU and an aversion to risk offers the City an opportunity to continue to attract next generation financial activities. A traditional third pillar of the City is the London insurance market, exemplified by Lloyd’s of London in its emblematic Richard Rogers designed building just south of the Bank of England. Lloyd’s remains as adventurous in the twenty-first century as it was when it, too, grew out of the coffee houses and took on some of the more extreme risks. Its greatest challenge going forward may well prove to be climate change with its impact on almost every form of business activity. Lloyd’s is symbolic of London’s leadership in insurance but, in terms of size, is no bigger than most of the established general insurers. However, Lloyd’s presence means that much of the global risk in the world, whether it is the legs of Juventus striker Christian Ronaldo or forest fires in California or the commercial fallout from the coronavirus lockdown ends up in the City. The UK insurance market, with $283 billion of assets, is the largest in Europe and the fourth largest in the world, behind the US, China and Japan. The UK is also 171

THE GREAT BRITISH REB OOT the largest source of pension funds in Europe, with $3.1 trillion (£2.4 trillion) of assets. However, measuring the scale of British insurance dominance is tricky because so much of its activity is global. To most UK citizens, the Prudential, the grand old dowager of insurance founded in 1848, is associated with ‘the man from the Pru’ who used to sell policies by calling on customers in their own homes and directly collecting premiums. In more recent times, the Prudential has sold its policies though financial advisers and directly on the web. The Prudential and its fund management arm, M&G, is still largely associated with the savings and insurance industry in the UK, but the reality is that in recent decades it has become a very different organisation and growth has come from overseas. In particular, there has been phenomenal growth in the US and Asia. Indeed, the overseas enterprises are now far larger than the Pru’s domestic operations. In March 2018, the group’s Canadian born chief executive, Mike Wells, revealed that the fast growth of its US and Asian operations, which had assets of £318 billion and had made profits of £4.2 billion in 2017–18, meant that it would be split off and named Prudential Plc. The Pru’s conquest of Asia, and China in particular, offers a clear example of how Britain’s insurers are not bound by national borders or currency blocs, having made impressive bets on the rise of Pacific prosperity. The split was finalised in the autumn of 2019. Prudential’s heritage life operations were combined with M&G and were listed as M&G. The international part of the enterprise, consisting of the Asian operations and Jackson Life in the US and Africa, was listed as the Prudential and attained a value of nearly £40 billion. This did not go far enough for some. In February 2020, the US activist investor Third Point, headed by financier Dan Loeb, bought a 5 per cent stake in Prudential and demanded a further demerger of the US annuity operation, Jackson Life. Over the years there has been a litany of dire warnings about our global financial pre-eminence each time the UK has refused to 172

THE MONEYTREE go along with the EU’s march towards becoming a superstate. When the UK declined to join the single currency in 1999, we were warned of the enormous damage that would be done to London as a financial centre. We were told that bankers would flee to Frankfurt and Paris or follow the money to the booming Asian financial centres in Hong Kong, Singapore and Shanghai but, while there has been some exit of talent to the east, almost no major financial institution has felt bold enough to make the shift away from London. The UK’s two international banks, HSBC and Standard Chartered, have both examined the economics of a move and decided to stay. Most of their operations remain in the UK. Among the reasons why London thrives as a banking sector is the City’s domination of foreign currency trading. Data collected by the Bank for International Settlements in Basle shows that the UK accounts for an astonishing 37 per cent of global foreign exchange trading, well ahead of the US (20 per cent), Singapore, Hong Kong and other financial centres. The bulk of the transactions, which average $2.4 trillion-a-day (£1.9 trillion), are transacted in London. More than twice the volume of dollars are traded in London than in New York, and more than twice the number of euros are traded in the UK than in all the seventeen euro area countries put together. In the period since the June 2016 referendum, the UK has demonstrated its global attraction by becoming the dominant centre for trading the Chinese currency the renminbi. Trading volumes in the renminbi against the US dollar reached $73 billion (£56.2 billion) in October 2019, exceeding the euro trade of over $66 billion (£50.1 billion) against the pound that same month. Many of the global banks, including the mighty New York investment bank Goldman Sachs, have chosen to locate themselves in London, building ever larger and more lavish global headquarters. Goldman is among those that have moved small teams of investment bankers to Frankfurt and other financial centres so as to be closer to clients, but the bulk of their operations, including 173

THE GREAT BRITISH REB OOT the start-up online consumer bank Marcus, operate out of London. Even internet giants such as Google have decided that the UK, with its range of consultancy, legal and financial services, is the most suitable location for its European headquarters campus in the newly fashionable King’s Cross area of north London. In spite of gloomy predictions from the IMF and others, economic shocks are not necessarily wealth destroying. For example, after Britain’s chaotic withdrawal from the euro’s predecessor, the European Monetary System, in 1992, the economy soared. When the then Labour Chancellor, Gordon Brown, chose to exclude us from the single currency project in June 2003, the UK economy was saved from the abyss. We must remember, too, that Britain truly is an international centre, not just an outpost of Europe. Despite having only two runways at Heathrow, we remain a geographically favoured offshore financial centre, well placed to deal with the needs of Asia and America. This explains why the City has attracted 250 foreign banks to these shores and why it dominates the foreign exchange markets. The key Libor and Euribor interest rates, which establish the cost of trillions of pounds of credit and mortgages, are set in London. The successor to Libor, the SONIA, was developed at the Bank of England. Key commodity prices for the rest of the world, ranging from gold to Brent crude oil, are set by the City’s markets. The Square Mile also has Europe’s most vibrant stock and derivatives markets and, with its tradition of innovation, is becoming one of the world’s most important centres for fintech, the digital financial revolution for the next generation. The conventional wisdom was that if the UK left the EU, tens of thousands of banking and financial jobs would decamp to Paris, Frankfurt, Dublin and Luxembourg, giving them the opportunity to usurp London’s hegemony. Some jobs have gone, but there has been a net gain since the 2016 Brexit vote. The UK’s largest bank, HSBC, decided to remain headquartered in London, having conducted a £40 million study of the pros and cons of leaving for Hong Kong. 174

THE MONEYTREE There were warnings that 10,000 posts would shift to the French capital, but in the face of the heavy promotion of Paris by the French government just 1,000 jobs have moved.12 Doubtless there may be a short-term price to pay as some of the largest investment banks send some employees to the Continent, but these would in all likelihood be replaced by countless workers from India, China, South America and elsewhere in the world as we focus on the global market. In any case, the number of jobs we are talking about is a fraction of the total employed by the big investment banks, which will have a negligible effect on the power of the City to lure investment and workers to Britain. Since the turn of the millennium, tens of thousands of French and Greeks – often with the advanced numerical skills required to thrive on trading floors – have migrated to Britain in search of bigger salaries and better lifestyles. French workers in the financial services industry made London their first port of call when the socialist government of President François Hollande, who held office from 2012 to 2017, raised income taxes to 80 per cent of earnings (a decision subsequently scaled back). As a consequence, parts of London have become ‘suburbs’ of Paris, with many bankers doing weekly commutes. At times, certain continental banks have employed more people in the Square Mile than they did in their own countries. Would all this survive Brexit? My frequent conversations and meetings with leading figures in the banking industry and officials from the Bank of England, as well as the insurance industry, certainly suggest it would. Senior Bank of England officials remain philosophical about the impact on the City of being outside the EU – in spite of an official forecast cautioning a potential 3.5 per cent loss of GDP.13 In a recent private conversation, one official told me that he would not be concerned if some jobs moved overseas to Europe because the City is so good at embracing the next cutting-edge development in financial trading. He noted that the City and the UK were already pioneers of the latest financial technology, with the 175

THE GREAT BRITISH REB OOT creation of internet banks offering highly personalised services available only on the web. Financial innovation naturally gravitates towards the City because it offers favourable conditions for business and has always done so. In the 1960s and 1970s, US and continental investment banks transferred some operations to London after successive American governments imposed taxes that made it expensive for foreign corporations and governments to raise loans and issue bonds on Wall Street, and because of an unfavourable regulatory regime. Within a few short years, the entire business of raising loans and credits in foreign currencies had jumped across the Atlantic to the City in what became known as the Eurodollar, Eurobond and syndicated loans markets, which firmly established themselves here. In turn, these new markets attracted major American investment banks to the City and, after Mrs Thatcher’s epoch-making ‘Big Bang’ reforms of the 1980s, which relaxed regulations to make financial dealing easier, the City of London became still more international. It’s true that there have been downsides to this story of vibrant financial development. In the run-up to the banking crisis of 2007–09, many of the complicated financial products, known as derivatives, were invented in the UK’s dealing rooms. These were traded around the world, but later imploded in value. It may not have been the finest moment in the illustrious history of the City, but it does demonstrate the continuous ability of traders based in London to adapt and reinvent themselves as the needs of global finance change. For all their bravado, none of Europe’s would-be financial capitals, such as Frankfurt, Paris and Amsterdam, has the same deep traditions of global banking and commodity and share trading as has London. That is why in recent decades, as growth exploded from Brazil to China, so many natural resources firms chose the LSE to float and trade their shares. In the City they encounter not just free, open and well-regulated markets, but all the skills they need for fundraising, mergers and acquisitions, and 176

THE MONEYTREE other corporate dealings. The big law and accounting firms in the City are part of a professional infrastructure that would be almost impossible to replicate on the Continent. The unique ‘can do’ approach to capitalism and free markets in London would be anathema to Paris and Frankfurt. Indeed, Europe’s habit of stifling enterprise and slowing markets is antithetical to everything the City of London does. Its compulsion to regulate, to tax and to boss individuals and institutions around is fatal to commercial success. Innovation holds the key to the City’s future growth. Among the new key areas of interest are financial technology, green finance, Islamic finance and infrastructure investment – the latter seeks to build on the UK’s status as the first country to explore privatisation. Innovation in finance has a long history dating from the invention of double-entry bookkeeping to the creation of modern central banking and electronic payments systems such as CHAPs and SWIFT, which are used to make international payments. The IT behind many of these systems used to be clunky and slow with the payments passing through multiple hands – correspondent banks in the case of global payments – before reaching their destination, but that has changed. Fintech allows users to speed up transactions and end the ‘never, never land’ as cash is shunted around the system. Financial advisers and asset managers are increasingly moving to online applications to handle client needs. However, modern systems bring with them a new range of problems – cybersecurity, money laundering and online fraud – and they can also sacrifice customer service for speed. The twenty-first century has also seen the development of new payment tools such as the digital wallet and the expansion of stand-alone payment groups such as Worldpay and PayPal, which provide the technology systems behind credit cards, Apple pay and banking systems. It has also seen the introduction of all manner of new automated financial services for retail and commercial users. Cyber currencies, most notably Bitcoin, have been exploited by 177

THE GREAT BRITISH REB OOT unscrupulous financial players who have preyed on the vulnerable, but they also introduced new simpler accounting measures such as the distributed ledger. The Bank of England is among those central banks to buy into the digital revolution with the creation of a ‘sandbox’ in which it co-invests and tries out new technologies. The IMF found that global investment in fintech has been steadily rising, jumping from $10.8 billion (£6.2 billion) in 2010 to $13.6 billion (£10.5 billion) in 2016.14 In the aftermath of the financial crisis and the subsequent discovery of scandal and fraud in the setting of Libor and Euribor interest rates, which govern the costs of big corporate loans and mortgages around the world, the British Bankers Association, which administered Libor, was abolished and replaced by a new representative body for financial groups in London – UK Finance. Operating from state-of-the-art offices at Angel Court in the City, under the leadership of the former Chief Financial Officer of Santander UK, Stephen Jones,15 UK Finance is having to adjust rapidly to fintech. Grey haired, bespectacled and intense, Jones – with his conventional banking background – recognised a new reality: I think open banking, peer-to-peer lending, technology and the way that people choose to curate and collect the various service providers they want to have access to on their telephone will fundamentally change the way that both consumers and SMEs in particular interact with the people who look after their data – the people who look after their money and the people they trust to do those two things. In my view, the trust in data is now increasing as is the trust in the deposit taking institution with whom you place your cash. The fusion between information and money is how we think about the new range of services that will intermediate that.16

As a global financial centre, equipped with cutting-edge IT skills developed at the UK’s research universities, the UK is well equipped 178

THE MONEYTREE to be both a testbed for fintech and an originator. The value accrued by Worldpay, which began as a germ of an idea within Royal Bank of Scotland, is where this chapter began. Research by the accounting firm KPMG shows that Britain is already becoming a powerhouse in fintech, attracting $16 billion (£12.3 billion) investment in the first half of 2018 and 28 per cent of global investment in fintech investment worth $57.9 billion (£44.4 billion), outpacing its nearest Western rival, the United States.17 Among the other G20 nations, China’s Ant Financial, part of the Alibaba online giant, the highest valued fintech company in the world, has been growing by leaps and bounds with a 65 per cent jump in profits to $14 billion (£10.8 billion) in 2018,18 but there must be serious doubts as to whether Western consumers and businesses will ever trust personal and financial data to a company run from an authoritarian state. Western doubts about trusting Beijing have also been loudly voiced in relation to the telecoms provider Huawei. In August 2018, President Donald Trump forbade the use of Huawei equipment in the United States, provoking a global debate on the use of Chinese technology by Western democracies. The opportunities for fintech in the UK are enormous. Entrepreneurs, such as Ron Kalifa at Worldpay and Samir Desai, the founder and chief executive of peer-to-peer lender Funding Circle, have demonstrated what can be achieved. UK venture capital, the LSE and the private sector has generally demonstrated a willingness to invest. The Bank of England has established a ‘Fintech Hub’ to encourage innovation, and has recognised the need to embrace technology to update its biggest bit of infrastructure, the Real Time Gross Settlement System (RTGS), which handles £600 billion19 of transactions each day. Deputy governor of the Bank of England, Dave Ramsden, recognises the need for the ‘Old Lady’ to modernise current structures, using fintech to drive change and resilience. The Bank’s deputy governor argues: ‘The post-trade system is a collection of systems, infrastructures and workflows that differ across firms. Many of these systems are unable to talk to each other.’20 179

THE GREAT BRITISH REB OOT The City regulator, the Financial Conduct Authority (FCA), has sought to encourage growth by authorising new firms and seeking to balance prudent regulation with the need to encourage innovation. This has led some critics to suggest that, in its efforts to encourage innovation, it has taken its eye off the ball and returned to the kind of light-touch regulation that contributed to the 2007 financial crisis. There are bound to be setbacks. When Spanishowned TSB sought to transfer advanced open banking technology, developed by its owner Catalan-based Sabadell, it all but destroyed the reputation and finances of the bank. In February 2019, TSB revealed that the meltdown of its platform had cost the bank £330 million, and 80,000 customers chose to switch their accounts to its competitors.21 It also exposed the vulnerability of consumers to cybercrime. However, the former chief executive of the FCA, Andrew Bailey, who took over as governor of the Bank of England in March 2020, is known to have breathed a huge sigh of relief when, in parallel, one of the biggest clearing banks, Barclays, under FCA tutelage, supervised the migration of millions of retail and small business customers, their sort codes and account numbers from ‘the historic Barclays’ to a new stand-alone, ringfenced UK bank without any major problems. Both cases demonstrate how financial technology, for better or worse, is rapidly adapting and it is this adaptation that is responsible for driving change in the UK’s complex financial sector. Former UK Finance boss Stephen Jones is confident that UK regulators will draw the line in the right place, and that they are better equipped than their Brussels counterparts in this area: Anybody who has a new idea and is not sure how it is going to interact with the regulator can go to the sandbox experiment with the regulators. That’s hugely productive, proactive and supportive, and means that a lot of people are thinking about financial services in a mobile way and look to the UK because of the quality of regulation. That I fundamentally believe in. In 180

THE MONEYTREE spite of the fact that I supported Remain, Brussels is not forward looking. Brussels is protectionist, it is bureaucratic, it is zealous. I was born there and brought up in Germany but, actually, the UK has a much better culture. I think that culture is openness.22

The UK’s ability to stay ahead in the battle to remain the world leader in fintech is going to require huge support. Financing ‘intangible’ investments will require a different state of mind, as Jonathan Haskel and Stian Westlake argue in Capitalism without Capital.23 The shift in thinking needed to secure loans against unseen, intangible assets such as big data is less intuitive than lending against property, a production line or a new physical technology such as power units for electric cars. That is going to require a substantial change by policymakers, perhaps ending favourable tax treatment for debt in favour of equity and, in particular, fintech start-ups. Another key to staying ahead in financial technology, as it is known in the creative industries, manufacturing and much else, is going to be backing for R&D. The Conservative government’s industrial strategy aimed to raise public spending on R&D to £12.5 billion by 2021–22, with a target of 2.4 per cent of GDP.24 Maintaining an edge in the burgeoning fintech space is going to require a Britain working all out post-Brexit to maintain an edge in pushing both tech frontiers and skills. The reality of fintech, as it is with the global digital giants, is that it does not recognise borders. The EU’s Competition Commissioner can seek redress against Silicon Valley by penalising Google for unfair competition and create barriers to expansion within the EU 27, but the essence of the world wide web is open access. The salmon-coloured Monzo card favoured by millennials has gained enormous traction since it was founded in the UK in 2016. Among its attractions is commission-free access to foreign currency anywhere in the world irrespective of borders. It operates under a restricted banking licence granted by the UK authorities. 181

THE GREAT BRITISH REB OOT Users are signed up on mobile phones and personal details downloaded by video link. The convenience of fintech and innovation has also created different kinds of opportunities at the other end of the market for customers who crave personal service. This is partly the attraction of the Metro Bank, with its bright architect-designed banking halls, seven days a week bank opening and focus on the customer. The downside for this popular and fastgrowing franchise has been faulty accounting of capital, which was picked up by the regulators, and poor governance – including questionable use by the America founder, Vernon Hill, of his spouse Shirley Hill, founder of InterArch, as the architect in chief and recipient of consultancy fees. Nevertheless, Metro Bank is in its own way a product of the fintech revolution and a challenge to the notion that consumers want to be shunted off to an online service. Personally, I have long been convinced that once the branch closure programme for the high street banks has played itself out and, as customers shift to online accounts, a demand for new banking halls that offer a premium service will be created. Keeping the accelerator hard down on all forms of financial innovation is critical if the City and the financial services industry are to forge ahead. The renminbi trade is an example of what can be achieved on foreign exchange markets. The spiralling value of Worldpay is a demonstration of how value in fintech can be created. The governor of the Bank of England, Mark Carney, was among the first global financial leaders to recognise the perils and, by implication, the opportunities of ‘green finance’. Carney’s early speeches on the subject at Lloyd’s of London in 2015 and subsequently at IMF/World Bank meetings were greeted with a degree of scepticism, as was his appearance with his wife Diana at the Wilderness Festival at Cornbury Park, Oxford in 2013. There was a view that he would be better engaged in restricting himself to the knitting of monetary policy and financial stability. The Lloyd’s speech was, in its own way, prophetic, arguing that ‘in the fullness 182

THE MONEYTREE of time climate change will threaten financial resilience and longer term prosperity’. Carney alerted the insurance industry to the risks to its £2 trillion of assets that will arise from the switch to a low-carbon economy (LCE). He also called for better information on the carbon intensity of investments. It would be just four short years before, in April 2019, climate protesters from Extinction Rebellion closed the Thames crossings and occupied Oxford Circus, bringing London commerce to a halt. The House of Commons showed rare unanimity by becoming the first legislature to declare an ‘environment and climate emergency’. The response of the City and the government in developing new products to meet the green challenge has so far been piecemeal and disappointing. Among the greatest frustrations has been the abandonment of the Green Investment Bank (GIB) after a short life. Created by the coalition government in 2011 in the face of Treasury opposition, the Lib Dem Business Secretary, Vince Cable, told Parliament that the bank would be ‘a key component’ of the transition to a low-carbon economy, which will need ‘significant investment over the coming decades’. The GIB would have had an initial capitalisation of £3 billion, which ‘the government believed would leverage a further £15 billion of private investment’. By the end of March 2017, the GIB’s portfolio of one hundred projects totalled £12 billion, including £8.6 billion of committed private capital. GIB achieved investment in four target sectors: offshore wind, waste and bioenergy, energy efficiency and onshore renewables. However, because of the much smaller average size of transactions in energy efficiency projects, it wasn’t able to commit as much capital to that sector as the government would have liked. Largely seen as a Lib Dem initiative, the project lacked support at the Treasury because of the dent it made in the public finances. With the Liberals out of the way after the 2015 general election, the GIB was sacrificed on the altar of the public finances in 2017. After a heated bidding war, it was sold off to Australian investment 183

THE GREAT BRITISH REB OOT bankers Macquarie – known as the ‘vampire kangaroo’ – for £2.3 billion in August 2017.25 That was not the end of the matter. A subsequent report by the Public Accounts Committee of the Commons labelled the sale as ‘deeply regrettable’ and chastised the government for failing to seek guarantees that, under its new ownership, it would continue to support renewable energy projects. A promising green initiative aimed at using government resources to unlock private investment had been unloaded to a ruthless owner with a poor record of delivering on social goals. Nevertheless, the seeds of an important City presence in climate change had been planted in spite of government myopia over the GIB. The LSE has become a prominent host to the ‘green bonds’ that fund capital projects to meet the climate change challenge. In 2017, there were twenty-seven new green bonds listed, which raised $10.1 billion (£7.7 billion). In 2018, the Industrial and Commercial Bank of China launched a dual-currency $1.6 billion (£1.2 billion) green bond. The growing investment appetite for green holdings is symbolised by the listing of twenty-six green funds in London, which were offered by a variety of issuers, including Allianz, iShares, JSS, Mirova and Parvest. Clearly, with climate change being such a key part of the domestic and international agenda, the opportunity for the UK to build a substantial new business in lockstep with the political zeitgeist is there. The UK’s leadership in financial services and professional City markets will be hard to dislodge. Clearly, outside the EU there will be some leakage of jobs and expertise to other financial centres, but there is no evidence at all that Frankfurt, Paris or the European Central Bank want the responsibility for managing the risk that is at the heart of Anglo-Saxon capitalism. Many of the jobs that moved to continental locations, such as they are, have largely been switched for regulatory rather than commercial reasons – and are fewer than the numbers predicted. Meanwhile, the City is continuing to innovate as it moves into renminbi trading, Islamic finance,


THE MONEYTREE green bonds and infrastructure financing, but the biggest opportunity is, without doubt, financial technology. The LSE has moved into this space with its absorption of financial data and the creation of new indexes. The high street banks are increasingly becoming IT and data driven, striving to incorporate new data into what they do. Internet banks such as Atom are making their mark and the UK has become a global leader in the creation of financial comparison sites and platforms. Moreover, as Mark Carney has pointed out, the governance and regulation of finance in a digital world will be increasingly supranational. The challenges of climate change finance and digital banking are global and reach beyond trading blocs. In much the same way as the UK was able to become an offshore financial centre for American, Japanese and Chinese corporations, it can continue to provide the wholesale markets needed by EU-based corporations. With the exception of authoritarian economies, no precedents have been set for currencies, interest rate products, bonds and other instruments that are only traded in the markets using the same currency. However, there is much to be done in support of fintech, green markets and innovation, and the UK authorities cannot afford to abandon hopeful projects such as the Green Investment Bank. The post-Brexit City will need to be far more alert to how the national interest can service the UK’s international ambitions. As brilliant and important as the financial services sector has proved to be in withstanding and prospering amid the shifting sands of politics and technology, it is viewed with suspicion across much of the country. The bankers may be huge contributors to the tax system and the nation’s wealth, but their record on social inclusion is weak at best. Too often it places profit above ethics and social inclusion. The City has done too little to directly address the social, political and geographical divides highlighted by the 2016 referendum.


THE GREAT BRITISH REB OOT Addressing those divides, or ‘levelling up’, was among the main goals set by the newly elected Boris Johnson government in 2019. That goal has been greatly set back by the large-scale economic and financial interventions required by Covid-19. Nevertheless, one should not underestimate the resilience of the City and its ability to generate new forms of finance capable of assisting government in pursuit of ironing out social inequalities. The next chapter explores the divides between young and old, North and South, and the haves and have nots. Resolving these deep-seated fissures will be among the biggest challenges for a country standing more alone in the world.




In truth, laws are always useful to those with possessions and harmful to those who have nothing; from which it follows that the social state is advantageous to men only when all possess something and none has too much. Jean-Jacques Rousseau, The Social Contract, 1762 There is much in the UK in which the nation can take great pride: its universities, its creativity, its technology and its financial innovation, but the UK is also a country divided and riven by inequality, regional differences and tensions between generations. The Brexit referendum of 2016 exposed these deep rifts in British society. It may have focused on the relatively simple question of ‘in or out of the EU’, but the subterranean messages, gleaned from polling data and subsequent analysis, is much more complicated. Many of these issues have been lumped together as symptoms of a ‘Broken Britain’ – a failed society. The country appeared to be at odds with itself and split along many fault lines: North versus South, the rich and the comfortable middles classes versus the not so well off and the downright poor, town against country and, of particular importance, young versus old. Parts of the UK, notably Scotland, areas of Wales and the nationalists in Northern Ireland saw the referendum outcome as opportunity to end the Union and strike out in a different direction as part of a United Ireland or an independent Scotland, directly or indirectly as members of the European Union. The divisions shown were far from straightforward or subtle. Portrayed as the battle of North versus the South and London and 187

THE GREAT BRITISH REB OOT the prospering South East versus the rest of the country, the socio-economic differences worked at many different levels. In their own way, the most vibrant northern cities of Birmingham, Manchester and Leeds, with their gleaming new towers, thrusting media and IT communities, and high-quality red brick universities have more in common with parts of London than the more deprived northern areas. Pensioners, long treated as an under-privileged group in British society, increasingly became the target of criticism from younger people. The elderly were seen as being cosseted by subsidised travel passes, free prescriptions, winter fuel allowances and no cost television licences for the over 75s (until removed by the BBC in 2019, before the change was postponed in March 2020 because of the Covid-19 outbreak). There also was resentment that some of them had ‘gold plated’ final salary pension schemes. The established idea is that pensions and pecuniary benefits are salaries earned and delayed for the salad days ahead. It has been widely challenged in recent times. Much displeasure has been reserved for baby boomers, the immediate post-war children who reached retirement age in the early years of the twenty-first century. Some younger people see this group as the generation that benefited enormously from free university education and booming house prices due to the high inflation rates of the late twentieth century and the rising wages of the pre-financial crisis noughties. If anything the perceived divisions thrown up by Brexit could be worsened by the Covid-19 pandemic and lockdown. At times, during the peak of the coronavirus, it looked as if the country was united in adherence to lockdown rules and hyper-support for the NHS. If anything the pandemic could lead to wider misunderstandings among the generations. The oldest in society and their offspring felt let down by a system that left people to die in care homes. Younger workers, in the 18–24-year-old age group, are most likely to be badly affected by the surge in unemployment and lack of job opportunities. 188

A NATION DIVIDED Much of the criticism of generational conflict is based on stereotypes. Comparisons between the benefits of those who went to university in the 1950s, 1960s and 1970s and those that attended in the twenty-first century are wildly misleading. Just 4 per cent of school leavers went to university in the 1950s, rising to 14 per cent by the end of the 1970s. After the big push in the Blair–Brown years between 1997 and 2007, the numbers going to university soared above 40 per cent. The animosity towards those who enjoyed low-cost or cheap university education is partly misplaced because a huge majority of school leavers came nowhere close to achieving what was a relatively rare privilege. Among my closest friends from state schools in Brighton on England’s south coast, I was one of the few privileged to make it to university. A number, however, joined the professional classes through more traditional routes, such as being ‘articled’ to firms of solicitors or accountants straight from school. Other divisions identified are largely regarded as post financial crisis or global phenomena. The rise across the globe of ‘populist’ movements, such as Donald Trump’s Republicans in America and Victor Orbán’s Fidesz Party in Hungary, have been cited as responses to rising income inequality and uncontrolled immigration. There is a perceived growing divide between supposed elites and experts and ordinary citizens. The latter group is seen as having to pay the price for the missteps of rulers and bankers through a harsh squeeze on their incomes and, in Britain’s case, budgetary austerity. The anger directed against bankers and the governments that rescued them first erupted in the shape of the ‘Occupy Movement’ in New York City’s Zuccotti Park in September 2011, which was spread by social media to the steps of St Paul’s Cathedral in the City of London and the rest of the world. These divisions also found a political voice in progressive movements. The left, represented by the Democratic candidate Bernie Sanders in the 2016 US presidential campaign, and Sanders and Elizabeth Warren in the 2020 campaign, staged a remarkable 189

THE GREAT BRITISH REB OOT revival and was enthusiastically embraced by younger voters. In the UK, the rise of the left-wing ‘Momentum’ movement and the elevation of the perpetual outsider, Jeremy Corbyn, to the position of leader of Britain’s Labour Party in 2015 was also a response to perceived austerity and inequality. The Black Lives Matter movement joined the lexicon of causes after the brutal police killing of George Floyd in Minneapolis on 25 May 2020. It proved a blue touch paper which brought protesters onto the streets in the tens of thousands on both sides of the Atlantic defying Covid-19 rules of lockdown and social distancing. A number of damaged sections of the population have been identified from these diverse strands of thinking. The post-referendum Tory government of Theresa May, which took office in August 2016,1 discovered the ‘JAMs’ (just about managing middle classes). Think tanks such as the Resolution Foundation focused on rising income inequality. On the political left it became fashionable to highlight the cause of the new poor who, it is argued, have become increasingly dependent on a vast network of third sector supported food banks to see off hunger. On a more forensic level, there has been an effort to address the gender pay gap. The Office for National Statistics (ONS) has uncovered big differences in the earnings of ethnic groups in the UK. Chinese, Indian and mixed race groups all received higher pay than white British employees, while Pakistani and Bangladeshi ethnic groups were at the bottom of the pile.2 The really big questions, most notably the urgent need for a better system of social care for an ageing and dementia-affected population, have been kicked into the long grass by successive governments as being too difficult to deal with, but anyone visiting hospital A&E departments, short-stay wards or any hospital department can see first-hand what the NHS had to deal with long before the coronavirus became an additional burden. Along with traditional emergencies, people whisked into hospital with internal bleeding, work-related accidents or heart conditions have to compete for attention and beds with the elderly, the infirm and the 190

A NATION DIVIDED demented. For this latter group, even the most simple of human needs such as going to the toilet can become a major battleground between the ‘patient’ and A&E staff, who are often subjected to vile abuse. Social care is another subset of intergenerational divide. Doubtless, globalisation has left some groups behind economically and it certainly played its part in the glowing dissatisfaction, but a series of intergenerational issues have been identified as being at the heart of the problem. In a bid to fix these issues, it has become fashionable to call for a new social contract. This was a strong early feature of Theresa May’s battered premiership (2016–19) which was brought to a shuddering halt in spring 2019 by the Conservative leader’s inability to deliver Brexit. Attempts to deliver a new social settlement were effectively killed when the Tories surrendered their parliamentary majority in the snap election of 8 June 2017. May had outlined the causes of the social divide and her proposed solutions in her address to the Conservative conference on 5 October 2016. She told the party faithful: It wasn’t the wealthy who made the biggest sacrifices after the financial crash, but ordinary working-class families. If you’re one of those people who lost their job, who stayed in work but on reduced hours and took a pay cut as household bills rocketed . . . or someone who finds themselves out of work or on lower wages because of low-skilled immigration, life doesn’t seem that fair. So change has to come.

May went on to outline what she felt was needed for society. This included establishing a social contract that advocated a situation where local people would be trained up before cheap labour from overseas were taken on, ending the divisions and unfairness between a ‘prosperous older generation and the struggling younger generation and between the wealth of London and the rest of the country’. She went on to criticise bosses who earn a fortune but don’t help their staff and international companies that ‘treat tax 191

THE GREAT BRITISH REB OOT laws as an optional extra’. The former British prime minister instinctively understood some of the issues ailing Britain which contributed to the anti-establishment Brexit referendum outcome. Her weakened, ineffectual and Brexit-riven government meant that her efforts to put in place a new social contract and to define the ills dividing the UK, or for that matter many Western democracies, never had the opportunity to take seed and germinate. However, the search for a new social contract designed to ease the ills arising from the financial crisis zipped up the global agenda. When I interviewed David Lipton, the First Deputy Managing Director of the IMF in Washington in April of 2016,3 the historically fiscally conservative economic powerhouse was groping towards a new social settlement. Speaking from behind the desk of his capacious office, the official, regarded as the IMF’s intellectual leader at the time told me: ‘This is a moment where many are questioning. I don’t think the die is cast one way or another.’ Lipton argued that the IMF needed to do more by finding ways to make sure that the global monetary system ‘is supportive of rising living standards and not destructive of it’. That is a new way of thinking for an organisation which, for most of its sixty or so years of existence, has been associated with harsh solutions.4 The IMF has become one of the strongest advocates for a new social contract. Former deputy governor of the Bank of England, Nemat ‘Minoche’ Shafik, writing in the IMF’s Finance & Development magazine, argued in 2018 that ‘overcoming fears of technology and globalisation means rethinking the rights and obligations of citizenship’.5 As director of the London School of Economics, Shafik went on to argue that the social contract ‘frayed’ as a result of hyper-globalisation and the austerity that followed the financial crisis. Shafik advocated ‘pre-distribution policies, including work on education, social mobility, infrastructure investments in poorer regions and spreading productivity improvements’. She also noted that the advanced nations faced ‘huge issues of intergenerational fairness’. 192

A NATION DIVIDED Social contract theories have a long history. They were popularised in the sixteenth, seventeenth and eighteenth centuries by political philosophers such as Thomas Hobbes, John Locke and, perhaps most famously, Jean-Jacques Rousseau as a means of explaining the nation state and the obligations of government to the governed. Emphasis varies among the classic theorists, but in essence a social contract is a two-way process in which governments and their people find common cause in the interests of the country, with everyone having a real stake in the outcome. That way, such contracts create an understanding that provides intellectual templates or policy frameworks for governing. People contribute to the system and take out of it according to their needs. That’s been the way of it down the generations. Britain has long functioned under the umbrella of such an implied understanding. However, the term ‘social contract’ found specific practical expression in Britain in the 1970s when Harold Wilson’s Labour government introduced its own social contract to deal with a desperate industrial situation that was creating social breakdown. It was the government’s latest attempt at creating an incomes policy. Under this social contract deal, the controversial 1971 Industrial Relations Act, put in place by former Tory Prime Minister Ted Heath,6 would be repealed and there would be food subsidies and a freeze on rent rises. As its part of the bargain, the Trades Union Congress would persuade its members to cooperate in a programme of voluntary wage restraint. Wilson’s social contract aimed to avoid the difficulty of former incomes policies that allowed employers (which in the nationalised industries was the state) to treat individual groups separately in wage negotiations. There would be a twelve-month interval between wage settlements to prevent repeated pay demands, which would give the state some level of predictability as regards future wage costs. In addition, negotiated increases in wages were to be confined to either compensating for inflation since the previous settlement or for anticipated future price increases before the next one. For a 193

THE GREAT BRITISH REB OOT while, the contract succeeded in avoiding the difficulty of former incomes policies. It was the foundation upon which Chancellor Denis Healey could introduce a strong budget to control the high inflation and growing government spending of the era. The policy evaporated towards the end of Labour’s spell in office in the late 1970s after the government of James Callaghan7 agreed to stiff monetary and fiscal policies imposed by the IMF. As is the case with much else in Britain, including the unwritten constitution, the idea of a social contract is more informal than formal and implicit rather than explicit; it is an understood settlement with the people. Traditionally, society has supported intergenerational contracts under which each generation would be provided for at the time of their need in the different stages of their lives: for children, from birth and throughout their early development through to education; for adults and families who need housing, jobs and healthcare; and for the elderly who need pensions and social care. This settlement found voice in the 1942 Beveridge Report and the phrase ‘from the cradle to the grave’.8 In the post-war era, economic growth and continually expanding social opportunities meant that each generation generally expected more than the one before. Britain’s highly developed social security system with its automatic stabilisers was designed to support the unemployed, kicking in during periods of economic slowdown and recession. The British economic settlement has long been to protect the vulnerable from harsher economic environments. The onset of Covid-19 saw government take a number of steps to alleviate socio-economic pain. Thousands of homeless people were scooped up from the streets and temporarily housed in hotels. One-off payments were made to families on Universal Credit. Children from vulnerable families were offered education while schools were closed. And free school meals were provided to less well-off households. A period of strong prosperity, which began with Britain’s exit from the exchange rate mechanism on 16 September 1992 (Black 194

A NATION DIVIDED Wednesday), picked up momentum in the years of the Blair Labour governments of 1997 to 2007, which ensured that the settlement was met. However, it was brought to a sudden halt by the financial crisis of 2007–08 and the following ‘Great Recession’. It should be noted that as far back as 2006, the year before Blair left Downing Street, there was media talk of a ‘Boomergeddon’. An economically blessed post-war generation associated with the hedonistic excesses of the sixties were seen as annexing or selfishly using up society’s resources. With the global financial crash starting in 2008, and during the long austerity programme afterwards, this feeling gathered pace. As the Tory–Lib Dem coalition government headed by David Cameron sought to tackle the Labour legacy of a £150 billion a year deficit and national debt running close to 90 per cent of national output, the size and scope of the government and the public sector was ruthlessly cut back. The landscape was ruthlessly remodelled. The public perception was that Britain was no longer meeting the terms of the generational contract and this longstanding arrangement could not be taken for granted. Increasingly, there was a sense that the old social contract was under real threat and fears mounted that young people might not achieve the progress their predecessors enjoyed. The perception was a little unfair. The UK had retained one of the most generous welfare systems in the Western world, and while unemployment surged across most of Europe after the financial crisis the UK avoided massive job losses; employment in the UK over the last decade has never been higher. The unemployment rate of 3.8 per cent of the workforce in the first months of 2020 was at its lowest level since 1974. In the wake of the financial crisis, former Conservative minister, David Willetts, fondly known as ‘Two Brains’ for his prodigious mental capacity, sparked a national debate about intergenerational imbalance, which has raged on ever since. Under the aegis of the Resolution Foundation, the left-leaning research and policy group he chairs, Lord Willetts argued9 that the settlement between the 195

THE GREAT BRITISH REB OOT generations had broken down. Older people, particularly the baby boomers born in the decade or two after the Second World War, were prospering in jobs, pensions, education and housing at the expense of the young. In 2015, he warned again: ‘We are reshaping the state and storing up problems . . . the Social Contract is a contract between the generations and in Britain it is being broken.’10 Willetts had fired the starting gun on calls for a new social contract in Britain. It was a cause taken up a year later by Labour leader, Ed Miliband, who weighed in: ‘The British promise – that every generation would do better than the last – was in jeopardy.’ Miliband might have been on message, but his advocacy may have been counterproductive. ‘Boomer blaming’, as it became known, gained further ground after the 2016 EU vote, which some interpreted as merely encouraging a sense of resentment and powerlessness among the young, but their bitter reaction at the end of June 2016 was typified by a blunt letter to the Independent: The baby boomers subsidised their lives with massive public borrowing, then voted for austerity; they enjoyed final salary pension schemes, then abolished them; they enjoyed free university education, then voted to abolish that, too; they enjoyed public utilities, then sold them off; and now, after enjoying a lifetime of EU citizenship, they’ve voted to take it away from us – not even to save money, but simply to give them a nationalistic thrill. Enough is enough!11

Sections of the academic community viewed the referendum outcome as the culmination of the simmering schism between the generations, made worse by Britain’s misshapen economy. For instance, Cambridge University’s Chris Bickerton cited the UK’s consumption-driven growth model which had sustained the demand for a low-skilled service sector.12 After the economic crisis of 2008, fewer young people in this sector had access to loans and 196

A NATION DIVIDED mortgages and so were further boxed in financially and socially. Wealth distribution was prominent on a list that contained tax and pensions, jobs, housing, education and politics – all of which were perceived as stymying social mobility and needed to be fixed. On the financial gap, Willetts was to observe: ‘There are some specific reasons why younger pensioners, the boomers, who are now retiring, have ended up enjoying spectacular advantages which may not boost the incomes of those coming after them.’ Even so, young British people were still in a far better position than many of their continental counterparts. In the euro area countries the jobless legacy of the financial crisis of and the subsequent Greek and eurozone crises would take decades to resolve. Greece had the highest level of social disruption, with a youth unemployment rate of 40.4 per cent in 2019; in Spain, the level remained uncomfortably high at 31.7 per cent; and Italy had an unemployment rate of 30.5 per cent.13 In contrast, unemployment among 16 to 24 year-olds in the UK stood at 11.2 per cent of the workforce, the lowest level it had been since the early 1990s.14 Furthermore, the UK continued to create new jobs for its young people, at least until the corona pandemic interrupted the normal economic order. On paper at least, they should feel less alienated, but the Resolution Foundation noted that, in contrast to older generations, young adults were making no income progress and were accumulating far less wealth.15 Although household wealth has grown rapidly since 2000, it is only higher for those born before the 1960s. According to the foundation, intergenerational income inequalities have become higher with wealth gaps growing, too – a situation likely to be exacerbated by the already wealthy millennials born between 1981 and 1996 who will inherit large sums from their families. To add to these intergenerational stresses, with tuition fee caps now lifted, graduates are leaving university after a three-year course with an average debt of £50,000. All in all the report concluded, the young were having a very tough time. However, the numbers do not tell the whole story. 197

THE GREAT BRITISH REB OOT Cultural changes mean that the aspirations of the young to accumulate wealth may be less pronounced. Many are prone to more flexible lifestyle patterns that do not prioritise work and economic progress above all else. Similarly, the idea that it was easier for an older generation to climb the housing ladder also requires some rethinking. Yes, house prices – certainly in the South of England – have surged way beyond incomes, but the rigidities of the mortgage market have changed dramatically. The number of home loan suppliers has increased exponentially, the mortgage choices are countless and interest rates since the financial crisis have never been lower. I personally recall returning to the UK in 1989 after a lengthy spell as a correspondent in Washington, and being required to pay 12.75 per cent in mortgage interest just to move onto the housing ladder. House buyers of the post financial crisis generation might regard 2.75 per cent as too high. The financial crisis without doubt left an indelible mark on incomes. In 2015, the Institute for Fiscal Studies estimated average pensioner incomes at £394 a week. This was greater than the rest of the population, which was estimated to have an average income of £385 per week. The difference was marginal and the surprise about this data was the modest earnings for both groups. In 2017, official statistics sought to identify the full impact of the financial crash. The younger generation was shown to earn less than the generation that came before them at the same age. Young people had become, on average, 7 per cent worse off since 2008. The over 60s, supported by retail price adjusted state pensions, were 11 per cent better off.16 As well as insufficient income, many youngsters – unlike those from comfortable backgrounds – lacked access and a share in the country’s assets in the shape of housing, shares and cash savings. The more assets behind them the more secure young people feel and the more likely they are to take chances in their careers. Gifts and inheritances can make a big difference. Taking the first step up the housing ladder often enjoys the support of the bank of ‘Mum 198

A NATION DIVIDED and Dad’. In essence, such transfers allow young people from better off backgrounds to leap over their peers and gain a share of their prospective inheritances early. All manner of ideas have been put forward as a means of addressing intergenerational inequalities. The Blairite Labour supporting Institute for Public Policy Research (IPPR) advocates a Citizens’ Wealth Fund, which will fuse the nation’s private and corporate finances to provide a minimum inheritance for all through a universal dividend.17 Such a fund would be owned and run by everybody and would accumulate assets on behalf of everyone, giving everyone a stake in the economy. In addition, the IPPR considered the issue of older people continuing to make up an ever larger proportion of the UK working population. It has promoted18 a policy that it believes will fund retirement and ameliorate general attitudes towards ageing. The IPPR’s key recommendation was for the development of regional generational accounts as a basis for planning, which in turn would lead to a form of fiscal devolution. Another solution for reducing inequality is the introduction of a Universal Basic Income (UBI). It is usually described as a tool to achieve redistributive objectives, such as tackling poverty and inequality while allowing the social support system to reach sections of the population who for various reasons miss out on coverage. It can be a particularly useful tool when used as a one-time endowment to reward a left out part of society, such as the post financial crash generation, so they can enjoy equality of opportunity earlier in life. The only lasting example of UBI, in place since 1982, exists in the politically conservative, independent-minded US state of Alaska, where dividends from the state’s oil and gas riches have been universally shared. Experiments in UBI type schemes have been trialled in Finland, India, Kenya and parts of the US.19 Advocates of UBI see it as a strategic instrument that can support the implementation of structural reforms to the economy. However, UBI opponents worry that it could have a 199

THE GREAT BRITISH REB OOT negative impact on the work ethic; moreover, if the UBI is too widely drawn it could divert unnecessary resources to wealthier households, thus adding to pre-existing inequalities. UBI schemes are supported on both the right and the left of the political spectrum. The Nobel Prize winning American economist and apostle of monetarism, Milton Friedman, thought it might improve the efficiency of the welfare state. In Britain, the Labour Party’s former Deputy Leader, John McDonnell, a self-described Marxist, supports UBI, regarding it as pathway towards reducing inequality by boosting the incomes of those at the bottom end of the scale. Several small-scale experiments are taking place around the world. In January 2017, Finland began a two-year trial involving 2,000 people who received just over £500 a month, whether they worked or not. By February 2019 it had been reported that the scheme had not improved the employment situation, although the participants had gained greater self-confidence. In California, Michael Duffy, the Mayor of Stockton, saw the idea as a radical way to fight poverty in his city. It was to be a ‘no strings’ guaranteed basic income of $500 a month for residents. Starting in 2019, a pilot scheme would see a group receive this sum as part of a privately funded eighteen-month experiment to see how they used the money. In February 2019, a trial in Scotland received the go-ahead as Fife Council began to shape a basic income pilot following a successful joint bid to the Scottish government for £250,000. Fife will work with North Ayrshire and the cities of Edinburgh and Glasgow in conjunction with NHS Scotland to explore the feasibility of pilots in their areas. The scheme aims to reduce poverty and inequality and find a route to a fairer and simpler welfare system. Elsewhere, Seattle, one of America’s richest cities (as a result of the presence of Amazon and Starbucks), has embarked on a path of raising the minimum wage to the highest level in North America as a means of reducing inequality. Other ideas for closing the intergenerational financial gap focus on radical changes to the 200

A NATION DIVIDED tax and pension systems. Lord Willetts came up with the idea of a windfall for the young. Every 25-year-old would receive a one-off payment of £10,000 from a new ‘lifetime receipts tax’ imposed on those inheriting £125,000 or more. This would displace the existing complex inheritance tax system. The endowment would help fund young adults as they seek to accumulate deposits for buying a house, starting a business or strengthening their education or skills development. As part of the package, workers above pensionable age would continue to pay National Insurance, ending one of the extra benefits enjoyed by Britain’s grey army. As coronavirus ravaged the UK in spring 2020, Miatta Fahnbulleh, chief executive of the New Economics Foundation, called for a rekindling of the spirit behind Beveridge’s welfare state. She advocated a minimum standard of living: ‘There should be a cash safety net that provides a Minimum Income Guarantee below which no one should be allowed to fall.’20 The Lifetime Individual Savings Account (LISA), introduced by George Osborne in 2016, has never been fully embraced or promoted but, potentially, it offers a pathway for reducing intergenerational inequalities. Lifetime ISAs can be used for younger people to climb the housing ladder and boost longer term savings and pensions. Anyone 18 years old or over but under 40 can open a Lifetime ISA. Participants in the savings scheme can invest £4,000 a year until they reach the age of fifty. To encourage participation, the government adds a 25 per cent bonus to these savings up to a maximum of £1,000 per year. The makings of an attractive way to diminish perceived intergenerational inequality is clearly there if properly implemented and if, over time, the tax and bonus elements are improved. The Resolution Foundation report noted that post-2008, the UK employment levels for the younger age groups had been buoyant, but many in the workforce were employed on low salaries, shift work, short-term contracts and self-employment – the so-called ‘gig economy’ – and the pay outcomes were less than 201

THE GREAT BRITISH REB OOT those in more traditional industrial employment. The plethora of contract jobs made employment levels look good, but they came with work insecurity and low pay. Such jobs formed part of what some commentators saw as Britain’s broken consumption-driven economic model – a factor which, they believed, brought about the Brexit vote. Nevertheless, in the three years since the Brexit vote, as the overall jobless rate has fallen, the labour market has tightened and the supply of apprenticeships has increased while part-time and contract jobs became more permanent, which has eased the downward pressure on the earnings of young people. The danger is that these gains could be endangered by Covid-19. Paul Johnson of the Institute of Fiscal Studies argues for more resources to ‘support and value further and technical education’.21 Digging deeper into generational pay stagnation for young adults, the foundation report revealed that while there was a 37 per cent increase in degree attainment among those born between 1969 and 1974, this dropped to just 7 per cent for those born in the early and late 1980s. Crucially, non-degree routes had not picked up the slack. Self-employment was greatest among those without degrees, with millennials the most likely group to work in the fastest growing but lowest-paying sectors such as services and hospitality. At the same time, millennials were less likely to move jobs – often the best route to a big pay rise. To tackle this, the Resolution Foundation called for greater job security and urged companies to issue regular contracts to those who worked in the gig economy, such as delivery drivers and fast-food workers, who were often employed on ‘zero hours’ contracts. As Britain moved into a period of full employment in 2018–19, an increasing number of zero hours and part-time jobs became more permanent. That may have taken some of the sting out of the ‘zero hours’ debate, but the Resolution proposals of better notice periods for shift workers and extended statutory rights for the self-employed are the types of reforms that will strengthen jobs in 202

A NATION DIVIDED post-Brexit Britain. Among the other ideas for underpinning jobs for the young is the £1 billion ‘Better Jobs Deal’, which offers practical support and funding to give younger workers the chance to move jobs or add to their training. Allied to this would be £1.5 billion to plug persistent gaps in technical education funding, which will ensure that the UK will become the technological powerhouse it is capable of being. The restoration of the funding status and availability of technical education will be a pre-requisite. Progressive tax and pension reforms are also seen as important for addressing intergenerational inequalities. Britain has a sophisticated apparatus for designing tax changes; the core institution is the Office of Tax Simplification. Further, there is no shortage of other proposals coming from the independent Institute for Fiscal Studies and more politically loaded groups such as the right-wing Taxpayers’ Alliance. Among the more obvious reforms to address intergenerational issues is the reform of inheritance tax. Those with sizeable estates regard such taxes as too onerous, while the have-nots resent tax breaks for the financially well placed. One possibility to address this issue might be to shift emphasis so that gifting, cascading cash and the settling of resources down the generations are subject to a more generous tax treatment. Another possible means of redressing the generation imbalance would be to abolish Council Tax and replace the same with a wealth tax that targets wealthier homeowners. In 2019 Britain’s Labour Party, in response to the belief that land and property ownership are central to social and economic division, produced a paper22 proposing the most radical changes in the way land and home ownership are managed in modern times. Edited by the prominent environmentalist activist George Monbiot, the report sought to upend the existing order of land and home ownership. The paper demanded more transparency about land and home ownership, creating a modern ‘Doomsday Book’ which would end the practice under which ownership is shielded from public gaze through offshore entities, trusts, nominee names 203

THE GREAT BRITISH REB OOT and other such devices. How the information was to be used and whether it might be a preliminary step towards confiscation for more appropriate use was left unsaid. Much of the content was highly controversial, including proposals to empower tenants over landlords with unlimited leases (effectively a form of confiscation) and a Community Ground Trust which would give the authorities huge powers to acquire land from commercial owners so it could be used, for instance, for social housing. Big farm ownership would also be attacked. Large estates would be broken up to create smaller units to be farmed by labourers and newcomers to agriculture. Unsurprisingly, the proposals came under fearsome attack as they appeared to undermine the very concept of private ownership and pivoted towards a form of collectivism that had already gone horribly wrong – from Zimbabwe to Venezuela. Most critically, the report looked to be a direct assault on Britain as a home-owning democracy. The radicalism of the proposals took one’s breath away. In economic terms they would be highly risky, driving down land and house prices, threatening the stability of the banking system and driving stretched homeowners into negative equity. Nevertheless, the fact that such a report could be written and embraced by a major political party boldly illustrated how the intergenerational divide moved to central stage and why modernisation of property ownership and taxation to allow greater access to home ownership to an alienated generation will be essential to social cohesion once outside the EU. Pensions have also become a highly sensitive and divisive subject. Resentment persists over post-Second World War and late twentieth-century generations who are beneficiaries of ‘gold plated’ defined benefit pensions. The final nails were driven into these pension benefits by the 1997 decision of then Chancellor, Gordon Brown, to end tax relief on corporate dividends. This, together with new tighter regulations on pension funds, signalled the end of this generous benefit in the private sector. However, these pensions 204

A NATION DIVIDED still persist in the public arena where they have often been seen as compensation for more meagre wages. The lack of access to such schemes for those entering the workforce in the twenty-first century has combined with a ‘demographic time bomb’, with the result that there are unprecedented numbers of people who have retired or are about to retire and not enough young people working or earning enough to support future pensioners through tax and National Insurance contributions. Many of these younger workers do not even earn enough to save for their own retirement pot. This has increased the pressure to create the highest skilled UK workforce possible, which will contribute ever larger sums of money into the system. That is why a skills-based, friendly immigration policy will be hugely important if social cohesion and the contract between the generations is to be renewed. The conventional wisdom is that pensioners and the soon-to-be retired will be nicely off, but at the expense of the young. Indeed, the system has been tilted in their favour. The triple lock on state retirement pensions put in place by the coalition government in 2010–11 meant that pensions rose each year in line with whichever is the highest: 2.5 per cent; the rate of inflation as measured by the retail prices index (RPI); or by earnings growth. This protection is reckoned to cost the Exchequer £60 billion a year. The future of the ‘triple lock’ came under scrutiny by Chancellor Rishi Sunak in 2020 in the context of the fiscal impacts of Covid-19. Whereas existing pensioners enjoy the fruits of the under stress triple lock, future retirees will have to wait longer for their benefits. The qualifying age for state pensions increased from sixty-five to sixty-six in 2020, with an expected to rise to sixty-seven by 2028. In 2019, the Centre for Social Justice, a think tank headed by former Conservative leader Iain Duncan-Smith, called for further changes to the state pension age. In an astonishing policy paper titled ‘Ageing Confidently’,23 it proposed to increase the state pension age dramatically – to seventy by 2028 and then to seventy-five a few 205

THE GREAT BRITISH REB OOT years later. Former Pensions Minister and analyst, Baroness Ros Altmann, sent me a note saying she found the whole idea preposterous, particularly for manual workers. ‘Apart from the fact that we are already seeing problems as the women’s state pension age has risen sharply, and further increases for men and women are already underway, these proposals would create significant social injustice,’ Altmann wrote. Equally contentious is the fact that those continuing to work after retirement age are no longer required to make National Insurance contributions (NIC). This anomaly is a relic of the pretence that NIC pays for state pensions. The reality is that income tax and NIC go into the same spending pot at the Treasury and the link between NIC and pensions is notional at best. Company pensions are also poorer value for the workforce of today and tomorrow. The era of final salary (defined benefit) schemes is long gone – except in the public sector – having been phased out from the 1990s. Such schemes turned out to be what Willetts described as ‘an unrepeatable special offer for one generation’. To make things worse, generous company pensions often created ‘black hole’ deficits which corporations and their current employees are working hard to eliminate, even though they gain no direct benefit. All of this created a situation in 2018 when pension specialists calculated24 that a £260,000 retirement pot was needed for a comfortable retirement for those finishing their working lives. This amounted to a jump of £100,000 over sixteen years. The additional amount needed was a result of the ultra-low interest rates paid out during and after the financial crisis, and rising life expectancy. However, the data also showed that the average pot held by 45 to 54-year-olds was just £71,340. As a result, millions face a sharp drop in living standards in contrast to the more comfortable retirements of the previous generation, especially for those enjoying final salary pensions. The Blair–Brown government established the Pensions Commission, headed by former deputy governor of the Bank of 206

A NATION DIVIDED England, Lord Adair Turner. It proposed far-reaching reforms, including a system of auto-enrolment similar to that deployed in other countries such as Sweden and Australia. The initiative requires all employers to automatically place staff aged between twenty-two and retirement age, who earn at least £10,000 a year, into a pension scheme and make contributions towards it. The proposal was implemented by the coalition government of 2010 and within a decade more than 10 million people were paying into the new plan, many of whom had no previous access to ‘private’ style pensions. Those enrolled in the scheme had the choice of placing their savings into a default fund or a choice of investment funds, including an ethical option, offered by private sector managers. The plan went some way to making sure that the millennial generation was, at the very least, saving for an additional retirement income. It was also widely drawn so that even the smallest employers such as the local hairdresser and the corner store grocer would be required to automatically enrol staff. Contributions by employers, employees and the government would rise over time. Nevertheless, the plan was not without its critics who feared the pensions pots created would be inadequate for a comfortable retirement and would condemn those within the scheme to pensions lower than the previous generation. The Resolution Foundation was not wholly impressed. It argued that the automatic enrolment of employees into less generous ‘defined contribution’ pensions would mean that younger groups would have higher pension scheme membership rates than their predecessors did at each age. It cautioned that, even though future pensioners could on average achieve broadly similar outcomes to recent retirees, there were great risks for younger generations. For example, a 1 per cent decline in investment returns in each remaining year of working life would reduce retirement incomes for millennial men by 8 per cent, well below the outcomes enjoyed by recent retirees. Nevertheless, the auto-enrolment scheme demonstrated that determined governments can make a difference and ensure that 207

THE GREAT BRITISH REB OOT future generations of retirees have decent, if not overly generous, pensions to look forward to. With a few more tweaks, it would be possible to make auto-enrolment more fireproof. The determination with which the pension gap problem was addressed is in marked contrast to adult social care, one of the hottest potatoes for the UK to address as it seeks to carve out a new social contract outside the EU. A gap in retirement coverage could be addressed by insisting that firms who use self-employed or agency workers should automatically enrol them in a scheme. The earnings threshold at which employees have to be enrolled could be lowered and changes in pension tax relief could be made so that the money is better shared among all income groups. At present, higher tax band recipients receive the greatest amount of tax relief. Instead of exempting people still in work and above pension age from National Insurance contributions, that money could be deployed by offering tax relief on NIC for lower- and middle-income workers. All of these measures could, potentially, redress some of the injustice felt by younger members of the workforce. Of all the issues dividing the generations, access to home ownership is the most raw. Younger people find it hard to relate to retirement because it is such a distance away, but finding accommodation and climbing the housing ladder is immediate and is the toughest of all the issues that face those entering the workforce – especially if they live in the nation’s largest cities, with London being the least accessible for would-be home buyers. The main complaint is that, down the decades, the affordability of housing has plummeted and it now takes much longer for younger people to become part of Britain’s property owning democracy. However, the reality is that the supply of finance is infinitely better than it used to be for baby boomers and their offspring. Among the key issues is the supply of homes, especially in London and the crowded South East of England. In the 1950s and 60s, 300,000 homes were built each year, but by 2015 the overall figure for private and public sector housing was half that. At the same time, most pensioners 208

A NATION DIVIDED and the soon to retire owned their homes and so had low housing costs. By contrast, those who had lower disposable incomes had to deal with the higher cost of properties and the difficulty in raising the large deposits necessary to qualify for a mortgage. The younger generations struggled to get on the housing ladder. That desperation was well-represented on the perennial Radio 4 farming saga The Archers when, in 2019, a desperate and aspirational young mother, Emma Grundy, working all hours of the day and night to save for a deposit, is driven to the edge when her husband Ed loses his main source of income. The strains on their marriage became so great the couple separated. That storyline accurately reflects the anxiety and frustration of many couples in their 20s and 30s. The data shows that millennials born between 1981 and 1996 have lower home ownership rates and higher housing costs than their predecessors. Indeed, they are half as likely as the baby boomers – born between 1946 and 1965 – to buy their homes by the age of thirty. Home ownership for the mid-twenties has virtually halved since 2000, with just 18 per cent of UK property wealth owned by the under-fifties. As some millennials face the real prospect of never owning their homes, they are being forced to pay high urban rents for often poor quality accommodation, or live with their parents. They were spending an average of almost a quarter of their income on housing – up from 8 per cent of young people of a comparative age born in the 1930s. One consequence of this is the potential burden on the public purse. In its intergenerational report, the Resolution Foundation found that a rising share of retiree renters, coupled with an ageing population, could more than double the housing benefit bill for pensioners from £6.3 billion in 2018 to £16 billion by 2060. The net social effect of the housing crisis has been that older people were seen as having roots in a community, but no connections. By contrast, the young had hundreds of connections, but no real local roots. So, there is a huge need to build more affordable 209

THE GREAT BRITISH REB OOT homes around the country in both urban and rural areas. Among the suggestions for dealing with the crisis are community land auctions, which will enable local authorities to bring more land forward for house building. This would be underpinned by stronger compulsory purchase powers and a £1.7 billion building precept, allowing councils to raise funds for house building in their area. Mixed housing schemes – combining private ownership and rented property – have also been suggested as a means of helping to blend age groups and diversify communities and thereby create social greater cohesion. As Communities Secretary in the Theresa May government, Sajid Javid,25 the banker turned politician, advocated sweeping planning reforms to address the issue of housing shortages in major cities, particularly in London. Javid proposed ‘land swaps’ where property close to commuter stations in the so-called green belt would be compensated for by extending the green belt into more rural areas. He also noted that other green belts – which were nothing of the kind because they were being used as rubbish dumps, car parks and the like – could be opened to developers for innovative housing projects.26 There is no shortage of proposals for addressing the housing imbalance, which is critical if Britain is to remain an attractive place to live for the professional technologists and creative talent the country will need to attract post-Brexit. Making rental property more attractive, as it is across much of continental Europe, is clearly a significant option. This requires leasehold reform, but not necessarily on the scale proposed by the Labour Party which would kill the private rental market stone dead. Simple reforms, such as limiting rent increases to the consumer price index (CPI) and introducing a better dispute or ombudsman system would assist. Changes in the way property taxes are assessed and levied might also assist in rebalancing the housing market. A more progressive property tax with surcharges on larger homes, second homes and empty houses might discourage the holding of property by the better off and older home owners. 210

A NATION DIVIDED Preferential stamp duty rates to encourage moving or downsizing could provide a useful nudge. Breaks on capital gains tax would incentivise owners of additional properties to sell those homes to first-time buyers. What is indisputable is that in a nation where the concept of a property owning democracy is so fixed in the culture, finding ways of ending the blockages in the system will be critical if tensions between generations are to be resolved. It is not just younger people who feel betrayed by the breakdown in the social contract. The NHS is one of the country’s most universally supported institutions and whatever its shortcomings it enjoys the support of most sections of the community. Amid complaints about funding shortfalls it is always first in line for more cash. This has been as true under Labour and coalition governments as it has been under Conservative administrations. So powerful is the hold that the NHS has on the national psyche even the mildest criticism is often regarded as a betrayal. When the NHS was founded in 1948, the British public had strong support for such a settlement, which had been forged as a result of a strong sense of community built up during the Second World War. Nevertheless, there are still myriad complaints about the way the NHS operates. These include waiting times in A&E departments, inflexible hours in the surgeries run by general practitioners, pressure on ambulance services, inadequate mental health care and, in some hospitals, cleanliness. All of these are potentially fixable by improved management of resources and more efficiency. The complaints melted away in the coronavirus crisis of 2020 during which locked-down households came together to applaud NHS workers every Thursday evening. The intense focus on combatting the epidemic, however, left the system scarred, with an enormous backlog of surgeries and treatments postponed. The pandemic exposed the weaknesses of a centralised and comparatively underfunded system. Interconnected with the NHS is Britain’s social care crisis. As anyone unfortunate enough to visit an A&E department at one of 211

THE GREAT BRITISH REB OOT the nation’s hospitals will testify, and as upsetting as the torn and broken bodies brought in by ambulances is, watching the medical staff struggling to cope with complaints from dementia patients is distressing. On a visit to the Royal Berkshire Hospital in Reading in 2019 to see a seriously ill family member, I witnessed first-hand the pressure on those seeking to help them. In the next cubicle, a nurse struggled to persuade a male patient to allow her to help toilet himself. For her trouble, she was subjected to a stream of curse words. In another cubicle the demented cries of a sick elderly patient rang through the area like screams in a haunted house. On the acute care ward, where my family member was eventually admitted, every bed other than that of my family member was occupied by the elderly and the demented. The preoccupation of the staff was to calm them down, dish out the medications and potions and dispatch them back to their family homes or the local cottage hospital as rapidly as possible. This superficial exposure to the NHS was a stark reminder of how much pressure there is on hospital cubicles and beds as a result of the failure by successive UK governments to properly address social care issues. In the last several years my family has been exposed first-hand to the financial fissures at the heart of the crisis in elderly care. My mother-in-law was suffering from cancer and dementia, the latter being associated with elderly patients. We arranged for her to be transferred to a wonderful new care home with comprehensive nursing care in the suburbs of Cardiff in Wales, her hometown. Fortunately, due to a lifetime of hard work and careful husbandry of resources by my mother-in-law and her late husband, there were adequate savings to take care of the immediate bills, which ran to £1,600 per week (higher than the standard cost of closer to £1,300 because of the additional nursing). However, at that rate of burn, the cash and other savings would have been eliminated in just over a year and her home would have had to be sold. Sadly, the cancer took her life after several months and this never 212

A NATION DIVIDED came about. The experience exposed us to the flimsiness and lopsided nature of social care. Those who have been the most careful in looking after their finances are punished for their care and frugality by paying the highest bills. The baby boomers, who are often regarded with disdain by the younger generation, more often than not find their lives and family incomes savaged by the social care system. At the other end of the spectrum, my elderly father, a refugee from the Holocaust, was cared for at his home in Brighton by my younger brother – who interrupted his own occupation to be a carer – and a dedicated team from the social care department. The under pressure team of carers and helpers arrived at his apartment twice a day to get him up in the mornings, bathe him and prepare him for bed in the evenings. In his latter days, a carer was assigned to be at his bedside throughout the night to make sure he was comfortable. One could not help but notice how the team of social carers were always under pressure, arriving breathless at my father’s side with limited time before they had to travel on to take care of their next charge. Nevertheless, despite being under immense pressure they were always tireless and gentle while carrying out what was an onerous job. When my father celebrated his 100th birthday in 2015, a young former nurse, who had moved from the public to the private sector, turned up in her spare time to bring him a bunch of flowers and a birthday card and to hold his hand. He eventually passed on at the age of 103 years in 2018. The care in the home was provided largely free of charge by the local authority – except for the end of life overnight stays for which there were modest charges (in the low thousands of pounds), which were picked up by the family. These mixed personal experiences, which in their own way were positive, demonstrate the erratic and financially inconsistent nature of social care in the UK. They also show the pressure that the NHS finds itself under from an increasingly elderly and dementia-affected older population, which frustrates relatives, friends, 213

THE GREAT BRITISH REB OOT neighbours and first responders who use the NHS as a default social care service. It is hardly surprising that British adults cite social care as their most pressing concern, with 42 per cent placing it in their top three concerns. Some studies even showed that it was the second highest consumer concern for 18 to 34-year-olds. Therefore, the coming decades pose a huge challenge to realise the welfare state’s promise to people as they age. Unfortunately, the UK’s politicians have made a total hash of addressing the issue, allowing it to become the most toxic issue in our domestic affairs. When the Labour Party unveiled plans for universal social care in the 2010 elections, to be partly paid for out of the estates of the deceased, the Tories immediately branded it a ‘death tax’, killing it stone dead as a political idea. Labour, under the leadership of leftwinger Jeremy Corbyn, took its revenge in the 2017 election, labelling the complex arrangements proposed by then prime minister, Theresa May, as a ‘dementia tax’. Subsequent polling showed that this played a critical role in condemning May to losing her majority. However, this did not deter her successor, Boris Johnson, from declaring on the steps of Downing Street that social care was a top priority, just hours after taking over from May as prime minister in July 2019. The Labour Party, too, declared that it wanted a longterm solution to social care funding. It argued that austerity had seen £6.3 billion wiped from the social care budget since 2010, which in turn imposed enormous strains on the system. The ageing of the baby boomer generation means there will be growing numbers of older people and more public spending on health, care and social security, which is set to rise by £24 billion in 2030 and by £63 billion in 2040. How this bill is to be met is among the most vexed questions facing Britain. As well as swamping the NHS, the social care problem is also placing huge pressure on local government, which has primary responsibility for social care. In 2018, the National Audit Office found that English councils with social care responsibilities were being forced to dip into their reserves to keep those services going. The watchdog predicted that 214

A NATION DIVIDED if this rate of spending continues one in ten councils will run out of cash by 2021. One possible short-term fix would be the introduction of a different funding settlement for local authorities, such as by abolishing Council Tax and replacing the same with a property tax which could be used more flexibly to raise extra income. My own view is that the main political parties have, by making social care a political football, missed a golden opportunity to put in place a long-term and enduring solution to the issue, a solution which would be much more equitable than the current settlement. The government needs to learn lessons from the Turner Report27 and auto-enrolment. Everyone entering the workforce should be automatically signed up to a social care endowment fund, into which a nominal amount of income would be paid each month using the PAYE system. The social care endowment fund would be managed by the private sector and all those paying in would be entitled to the care they prefer, whether in their own homes or care homes, irrespective of their means. All those paying into the social care endowment, a form of social insurance, would be entitled to full tax relief on their contributions. Clearly, such a fund would take time to build, but not as long as one might think. The National Employment Savings Trust, the default scheme for those enrolled in automatic enrolment pensions had, as of 2018, created an endowment of £3 billion. As is the case with pensions, employers and employees could opt to take out private sector social care insurance as an alternative to the endowment. This would require private sector insurers to come up with attractive products that enjoy the same tax relief benefits. Plainly, the crisis in social care already is with us and the social market approach outlined here will not be fit for purpose for several years. One possible way to address the gap would be for the government to borrow against future income, perhaps by issuing social care bonds; however, such an arrangement would inevitably be resisted by the Treasury which resents anything that might be 215

THE GREAT BRITISH REB OOT construed as damaging the integrity of the public finances. Another approach to bridge the gap could be a National Insurance surcharge with tax relief, which would be phased out as the endowment fund built up. However, it would mean taxpayers paying for the same services twice during the interim period. As part of a new social contract that cascades down the generations, it might be more politically acceptable than it seems at first blush. This is largely the approach on the Continent. Germans pay 7 per cent of their pre-tax salary into a long-term health and social insurance scheme, a sum that is matched by their employers. Pensioners and the short-term unemployed also contribute; children are covered by their parents and the German government meets the cost of the rest. The highest earners, civil servants and the self-employed use their private insurance to access the same resources. Under the scheme, whose aims are greater healthiness in an ageing population as well as cutting costs for the state, patients get access to gym sessions, sports facilities, nutrition advice and screening programmes run by companies in which doctors have a majority stake. This has seen the involvement of more doctors (who have set up their own practices) along with more community nurses for home visits to the elderly. Germany has chosen the social insurance route because its large manufacturing-based economy, with its reliable jobs for long periods, has made such an approach more viable. The tendency towards consensual coalition governments – which do not tear up the policies of predecessors when assuming power – has allowed greater long-term thinking. The curse of UK governance, as will be seen in a later chapter, is short-term thinking at Westminster, in Whitehall and in the boardroom. But, a form of social insurance has buy in from every section of society and has the capacity to bind people together rather than divide generations, which is why I consider it to be critical if post-Brexit UK is to reboot its social settlement at home and adjust to the changing global economic environment. Broken 216

A NATION DIVIDED Britain, if there really is such a thing, is fixable through some creative thinking and by removing issues such as social care from the furnace of daily politics. There are other intergenerational issues that need addressing. The Social Mobility Commission28 report in November 2016 noted that the generation that grew up in the 1980s under Margaret Thatcher was the first to start work with incomes lower than their parents. It concluded: ‘Britain has a deep social mobility problem which is getting worse for an entire generation of young people.’ Commission Chairman, Alan Milburn, a former Labour Health Secretary, said that solving the UK’s social mobility problem should be the ‘Holy Grail’ of public policy. Education should have been a social and economic leveller, but it was at the heart of the problem. What school and often what university you attended is key to determining an individual’s future. The more money a family has, the more likely it is for its members to get a good education and a good career. In the Commission’s view, the inequalities in British education make it harder for low-income families to move up the social scale. Up to half of our leading politicians, journalists, lawyers and those in the arts and elite sport came from private schools, despite this group comprising only 7 per cent of the population, according to authors Lee Elliot Major and Stephen Machin.29 Independent education clearly underpins the top spots in Britain’s social order. That is the reason why so many aspirational families make huge sacrifices to ensure that their children have the best education, even though they can barely afford it. By contrast, hundreds of thousands of young people leave school every year without basic literacy and numeracy skills – they are destined to end up in poorly paid jobs much like their parents. A situation has been created where extreme inequality and detached elites appear to sit uncomfortably side by side. The clear answer is a fairer education system with a new model of social mobility that develops all talents – academic, vocational and creative. 217

THE GREAT BRITISH REB OOT A January 2018 poll of small- and medium-sized businesses showed that 60 per cent of respondents indicated that their biggest concern was finding employees with the right skills. Further education leaders outlined four ways to meet this post-Brexit challenge. They proposed ‘a new social contract’ to better fund all full-time and part-time students in further and higher education.30 Along with this, they urged funding for a ‘lifetime learning entitlement’ for adults, plus a ‘national retraining programme’ and implementation of the Resolution Foundation’s ‘Better Jobs Deal’. The Northern Powerhouse Partnership urged the government to make boosting the performance of northern schools top priority to help bridge the gap. Brexit has proved to be the high watermark for political divisions among the generations. Long before the UK voted to leave the EU there had been general public disenchantment with MPs, the parliamentary process and voting systems, and too little decentralisation from Westminster and Whitehall – not to mention growing calls for the breakup of the UK itself as national devolution movements sought outright independence. The country began to fall out of love with politics and MPs after the Iraq invasion in 2003, followed by the Commons expenses scandal in 2009. Two referendums and two general elections in the four years post-2014, amplified by the way MPs handled the whole business of Brexit, further contributed to this sense of ennui. Democracy was already under strain as the Brexit struggle saw a ‘Remainer’ Commons fail to come to terms with the vote to leave the EU. Nobody could agree what the ‘will of the people’ amounted to and how to act on it. It became parliamentary sovereignty versus a plebiscite, with the executive pitted against the legislature. All this added up to a ‘democratic deficit’ where voters lacked proper access to decision-making, so damaging social cohesion. The two main political parties, Conservative and Labour, were founded and evolved to meet the social and economic challenges of the Industrial Revolution, but left versus right ideologies and an old-fashioned 218

A NATION DIVIDED political tribalism no longer look so relevant when hitherto national concerns have shifted to a multinational and global stage. Many of the social issues facing Britain – notably the lack of social mobility and diversity at the highest levels of society – existed long before the 2016 referendum. Brexit offers Britain a fresh start. It is a chance to crack on with intergenerational reforms around housing, education, long-term care, and social mobility and inclusion that has eluded our politicians. As Britain lifts its horizons and ambitions, it needs to address these shortcomings and heal the social divide. Those stresses have, if anything, been magnified by the pandemic. The act of leaving the EU offers that opportunity. The outcome of the December 2019 election, with an eighty seat Conservative majority, promised a period of governance stability, but the scars of the EU referendum and its disconcertingly confrontational aftermath remains fresh in the public mind. Layered on top of this has been dissatisfaction among the political classes about alleged government and administrative incompetence in battling Covid19. The new government of Boris Johnson looks determined not to allow complex trade negotiations get in the way of fixing the huge governance shortcomings at Westminster and the need for more regionalism and long-term thinking in the nation’s boardrooms. The intergenerational divide and big unresolved issues such as social care go hand in hand with governance reforms. The next chapter examines the shortcomings of our political system that were exposed by Brexit. It looks at the fundamental changes required in the way we run our country so that the creative, entrepreneurial and technological genius of Britain outside the EU can be better harnessed and unleashed.




The efficient secret of the English Constitution may be described as the close union, the nearly complete fusion of the executive and legislative powers. Walter Bagehot, The English Constitution, 1867 You wouldn’t know if you listened to the UK’s heated, irrational, divisive and often poorly informed political debates on radio, on television, in the Commons and around every dinner table across the land in the period after the June 2016 referendum. Nor could you divine it from the raucous parliamentary scenes in the weeks leading up to the original deadline of leaving the EU of 31 March 2019, or from the political manoeuvrings and constitutional eruptions that followed in the autumn of the same year. The noise and parliamentary divisions were not silenced until the general election, held on 12 December 2019, which swept Tory Prime Minister Boris Johnson back into office. The dissonance remained suppressed as the nation confronted coronavirus, lockdown and economic slump from 23 March 2020. It did not last long. Soon the old confrontational and divisive politics reappeared. A new Labour leader, Sir Keir Starmer, who replaced Jeremy Corbyn on 4 April 2020, was keen to make his mark. He brought lawyerly, forensic questioning to politics. Every seeming misstep in handling the crisis – a shortage of ventilators, the lack of PPE in hospitals, the lumbering roll-out of tests and even a morbid death count – was turned into a line of attack. When Johnson’s top aide Dominic Cummings went walk­ about in Durham during lockdown the forces of hell were 220

GOVERNANCE unleashed against Number 10. Remain supporters delighted in the discomfort and the unions flexed their muscles in the battles against school re-openings and private sector sackings. It was as if the general election and the humiliation of Labour at the polls had never happened. Notwithstanding all of the above, I have a revelation that might have been impossible to divine during the three-and-a-half-year interregnum which ended on 31 January 2020 and during the peak of the pandemic. Britain is rated in international league tables as one of the best run, most respected and least corrupt countries among the advanced nations, but you don’t have to believe me. This is the verdict of almost every independent assessment. Nevertheless, the conduct of the Brexit debate, the mercurial behaviour of the nation’s elected politicians and condemnation by leading policymakers or ‘experts’, including top public servants at the Treasury, the Bank of England and the independent Office for Budget Responsibility, would suggest a nation that had lost faith in its institutional structures. The Economist magazine, previously edited by none other than the constitutional guru Walter Bagehot, in the nineteenth century, was sufficiently disturbed in 20191 that it depicted on its cover Big Ben, the clock tower next to the Houses of Parliament, wrapped in a bundle of dynamite. It carried the provocative headline: ‘Next to blow: Britain’s constitution’. The weekly’s leading article argued that Britain’s unwritten constitution, once the envy of the world, was out of date. In particular, it was fiercely critical of former prime ministers Tony Blair (1997–2007) and David Cameron (2010–16) for messing with the Westminster Parliament by devolving powers to assemblies in Scotland, Wales and Northern Ireland without fully considering the impact on the constitution and the Union. The Economist had a point. In the same 2019 election as Boris Johnson secured his majority of eighty, the Scottish Nationalists won fortyeight of the fifty-five Scottish seats at Westminster with 45 per cent of the vote. This led the Scottish Nationalist First Minister, Nicola 221

THE GREAT BRITISH REB OOT Sturgeon, to demand a new independence referendum. Meanwhile, in Northern Ireland nationalist parties gained a slender majority over the unionists. Also exposed was the weakness of the 2011 Fixed Term Parliament Act, which, by requiring a two-thirds majority of the Commons before a prime minister could call an election, removed an important safety valve from the constitution. It rendered the traditional censure process – a vote of confidence in the government – impotent. The Johnson government pledged to introduce legislation designed to restore the status quo ante. The UK’s apparently shambolic decision-making and the loss of respect for the ‘Mother of Parliaments’ was looked upon with a mixture of puzzlement, frustration and glee in Brussels. The EU was not used to democracies that failed to accede to its wishes; when countries have in the past rejected monetary and constitutional arrangements at the ballot box, the votes have been rerun or ways have been found to circumvent the will of the people. Parliamentary sovereignty barely registered as an issue. In the UK, the ‘People’s Vote’ campaign which demanded a second, more nuanced referendum sought a similar outcome to France2 and Ireland where referendum results had been overturned by a second vote, but in spite of gathering support from respected members of all the major parties it had only limited success. In November 2019, the People’s Vote campaign fell into disarray after one its leading lights, the Finsbury communications founder, Roland Rudd, purged the ruling group of perceived disruptive elements, followed later by allegations of sexual harassment against a senior official. As talks with Brussels foundered, leaders in the EU felt comfortable in openly deriding the UK over its indecisiveness over Brexit. The former President of the European Council, Donald Tusk, went as far as to say there would be a ‘special place in hell’3 for Brexiteers who obstructed an agreement with the EU. It was as if the UK’s refusal to accede willingly to Brussels’ stipulations gave outsiders the right to shed diplomatic niceties and openly throw out insults. 222

GOVERNANCE My own experiences on visiting the US in the years since the June 2016 referendum is that informed Americans have been shocked by the Westminster shenanigans and governance failings. As much as informed Americans love the knockabout of the House of Commons, in contrast to the dreary, stage-managed debates on Capitol Hill, the UK’s reputation for having stable government and a Rolls-Royce bureaucracy had been rocked. Yes, there is little doubt that the Leave vote exposed huge shortcomings in the nation’s unwritten constitution. Indeed, a previously non-political and untried UK Supreme Court found itself drawn into political rulings when the government headed by Boris Johnson was seen as proroguing Parliament (closing it down) from 9 September 2019 until 14 October 2019 without proper consent. That decision was ruled unlawful by the Supreme Court on 24 September 2019 in a unanimous decision by all eleven judges. In effect, the Court found itself adjudicating in a rare dispute between the executive branch of the government and the Commons. Moreover, there has been a belief that a reluctant British Civil Service, used to marching in lockstep with the rules and regulations spewed out by Brussels for more than four decades, was slow or unwilling to rebuild its skills base for a different future outside the EU. The reality is that the Civil Service found itself directionless. The Theresa May government was riven by internal divisions that prevented it from acting decisively. ‘The Civil Service abhors a vacuum and the lack of effective leadership pushed people such as the UK’s chief negotiator, Olly Robbins, into the firing line,’ observed Jill Rutter, a senior fellow at the Institute for Government.4 Rutter expressed concern that the result of distrust in its civil servants would lead the UK in the direction of the United States, with a layer of political appointees sitting above the professional public officials. Some might argue that has already happened with Dominic Cummings, the political strategist who masterminded the Brexit campaign and Boris Johnson’s 2019 election victory, and Johnson’s most influential and divisive adviser. 223

THE GREAT BRITISH REB OOT Much of the criticism has been self-serving – it is the result of political resentments spawned by both sides as the UK came to terms with a new political settlement with the EU. In point of fact, when tasked by Boris Johnson’s government to prepare for a ‘No Deal’ Brexit in the autumn of 2019, the Civil Service went into overdrive to make sure that robust preparations were in train. In spite of the critical perception that the Civil Service was unprepared for leaving the EU, the Oxford University International Civil Service Effectiveness (InCiSE) Index5 placed the UK top of the global league, just ahead of its Anglo-Saxon and Commonwealth cohorts in New Zealand and Canada. There is much that could improve the UK’s decision-making; better governance is critical and will become even more so outside the EU. However, the UK has an unhappy history of seeking to implement large-scale IT projects designed to speed up governance. In 2013, the government abandoned a £10 billion effort to place NHS records (up and down the country) on one central system. When push came to shove early in the big lockdown of 2020 the Civil Service demonstrated it still has the right stuff. The furlough scheme to hibernate jobs during the lockdown of the first half of 2020 was implemented by HMRC with admirable speed allowing as many as 9 million employees to take advantage. Claimants seeking state assistance under the much derided Universal Credit system were processed in record time. The Treasury rapidly adjusted its coronavirus loan schemes, to make them more accessible. Together the army in concert with the NHS built emergency Nightingale hospitals the length and breadth of the land in a few short weeks. Such major criticisms that emerged focused on the centralised bureaucratic management within the NHS and Public Health England which appeared loath to include the private sector in anything it was doing. The report card for Civil Service response to a possible No Deal Brexit and the coronavirus has been far better than generally has been credited. The Institute for Government (IfG) noted: 224

GOVERNANCE The immense scale of the Brexit task drove innovations that should help government response to the coronavirus pandemic. No deal preparations saw the introduction of faster decision making, the rapid relocation of large number of officials onto priority projects, and closer working relationships with the governments in Wales, Scotland and Northern Ireland.6

Adjusting to life outside the EU and the Covid-19 response illustrate how investment in ‘smarter’ governance can improve the quality of outcomes. Embracing digital advances is going to be essential to boost productivity in the public sector. This chapter will examine what the UK needs to do to spruce up its governance, both in Whitehall and in the boardroom. In earlier chapters I sought to address the political deficit facing this country, much of which centred on the intergenerational divide, the geographical split between a disaffected North and the more prosperous South, and widespread disillusionment with decision-making and politicians. So, here I want to look at how the UK’s political framework, its institutions and processes can be improved. At the same time, a series of corporate failures7 and scandals have focused attention on the shortcomings of the UK’s full-throated form of capitalism. An overhaul and modernisation of the regulatory regime is required, alongside better auditing and more activism from often supine institutional investors. On 29 March 2019, the date Britain was due to leave the EU, a report by the IfG, stated: Few would have predicted that attempting to implement the Referendum result would have such a profound impact on government, even before the act of leaving. The challenge of negotiating, legislating and implementing Brexit has called into question how government works in the UK.8 225

THE GREAT BRITISH REB OOT To start with, it presented a profound challenge to the UK’s unwritten British Constitution, which is largely based on convention and precedent. The system has many anomalies, but it generally worked until it had to deal with the challenge posited by the 2016 referendum outcome. The main constraint on parliamentary authority, and one of the most profound reasons for the Brexit vote, was the perceived erosion of parliamentary sovereignty arising from being part of the EU. There was deep-seated frustration both in Parliament and in the country that too many of the laws, processes and rules under which the country is run emanate from Brussels, and too often this rulemaking worked to the detriment of the UK and its economy. The UK’s freedom of action was seen to have been imperilled by EU membership and, too often, the UK’s Civil Service, anxious to keep within the rules, observed them to the letter. Other EU members, more committed to the political objectives of the EU, paradoxically, have been willing to flout or circumvent undesirable and uncomfortable rules. Throughout 2018 and 2019, the usual parliamentary procedures went out of the window as a bitter struggle ensued to establish which had precedence: the will of the people or the sovereignty of Parliament. Veteran constitutional expert, Vernon Bogdanor,9 thinks these Brexit challenges could prove to be a positive force for the constitution and could actually transform our non-codified arrangement. Bogdanor argued that the state of uncertainty posed by both devolution and the referendum could prove a critical constitutional moment and bring about the creation of a written document. Devolution has been directly affected by Brexit, which only served to exacerbate the constitutional tensions between Westminster and the Scottish and Welsh governments in Edinburgh and Cardiff, respectively. The frenzied debate about customs arrangements between Northern Ireland and the Republic of Ireland exposed serious fractures in the Union, and some have seen the agreement 226

GOVERNANCE secured by Boris Johnson in the summer of 2019 as a stepping stone towards a united Ireland. The IfG argued that the post-referendum political hiatus exposed fault lies in the twenty-year-old devolution settlement, leaving the devolved governments in Scotland and Wales unsettled with no decisions made about the reallocation of EU powers and funding. EU rules provided a framework within which the devolved governments could diverge from UK government policy in areas such as agriculture, taxation and the environment. Former Chancellor of the Exchequer, George Osborne,10 actively proposed an extension of powers for the Scottish Parliament at Holyrood as part of an effort to enhance the Union and doubtless improve the prospects of the Conservative Party north of the border. The 2016 Scotland Act provided Scotland with new taxation powers, including the right to set its own Air Passenger Duty. Enhanced control was granted over social security benefits, including discretionary housing payments and elements of the controversial Universal Credit. Most significantly, substantial control over income tax was granted on income tax rates and tax bands on non-savings and non-dividend income. Separately, the devolved governments were also able to carve out their own modest trade relationships with Brussels. Leaving the EU means the loss of that framework and repatriates those powers back to the UK. At the start of her premiership, Theresa May pledged to ‘fully engage’ on this with the devolved administrations, but as Brexit became bogged down rancour took over. Both the Scottish Nationalist Party (SNP) and Plaid Cymru became full-throated in favour of independence and the breakup of the Union. In advance of the December 2019 general election, the Scottish Nationalist leader put to one side the tacit deal that there would be no further Scottish independence referendum for a generation. The SNP leader, Nicola Sturgeon, demanded a vote within one year as the price of a post-election agreement with the Labour Party. The Northern Ireland situation was equally strained. The ‘supply and confidence’ deal made between the 2017 government 227

THE GREAT BRITISH REB OOT of Theresa May and the Democratic Unionist Party (DUP) placed the latter in a uniquely powerful position in reaching a deal on the Irish border. It was also a hindrance in the effort to restore devolved rule in the province. The Assembly was officially suspended in September 2019. It had collapsed in January 2017 due to policy disagreements within the leadership and the resignation of the late Sinn Féin leader, Martin McGuinness, following a scandal involving the DUP and renewable energy. Subsequent discussions to restore the Assembly took place early in 2020 following Boris Johnson’s election victory. On 12 January 2020, Sinn Féin and the DUP re-entered devolved government in Northern Ireland after three years of deadlock. The DUP leader, Arlene Foster, was appointed as Northern Ireland’s First Minister, while Sinn Féin’s Michelle O’Neill was selected as Deputy First Minister. When Boris Johnson’s administration finally came up with a solution to the Irish border question in October 2019, Stormont, the hitherto suspended Assembly, was granted a critical role. Northern Ireland would stay in an all-Ireland economy and would follow EU regulations on agriculture and industrial goods, but it also stayed part of the UK customs union, meaning a two-border system with the UK–Northern Ireland regulatory border being fairly lightly patrolled. Northern Ireland was given the right to opt out of the all-Ireland system by means of a simple majority vote in Stormont. Democratic control was to remain in the devolved system, but the simple majority system was seen as weakening the hand of the DUP. Brexit thus placed the whole framework of the United Kingdom into question. The constitutional arrangements made at the time of devolution were insufficiently defined, fragile, confusing and inconsistent. At times it seemed that the glue holding the Union together was the financial subvention from England to the devolved countries. Brexit has at times made Britishness, inspiringly described by Gordon Brown11 in 2006, look badly frayed. Brown, in his defence of the Union, reminded the nation of ‘Britain’s finest 228

GOVERNANCE hour and the Dunkirk spirit . . . people who would not stand aside when Europe was in mortal danger and who, as defenders of liberty, intervened time and again to make sure tyranny never triumphed.’ There are times when the brittleness and divisions evoked by Brexit seem to fade into the background. The annual Remembrance Day parade at the Cenotaph, where party leaders bury divisions by standing side by side to honour the fallen – in the presence of the Royal Family – is one of those moments. There are those who sought to portray Brexit as the province of little Englanders, but it can also be seen through a different lens. The assembly of ambassadors, high commissioners and representatives of nations which fought alongside British soldiers in two world wars gathered at the Cenotaph provide a sharp reminder that the UK is far bigger than that. It may no longer be a global military power, but it does spend more on national security than any of its former partners in the EU and operates one of the largest foreign aid budgets among the advanced nations. The UK remains a global trading powerhouse with a history and influence way beyond the borders of Europe. Indeed, many of the pioneers who opened those frontiers were Irish, Scottish and Welsh, which left an indelible British mark on the world. A post-Brexit order should see every part of the UK recognise the opportunities offered by the new global reality. Paradoxically, London had another ally in Brussels that had an interest in holding the UK together. The EU was less than enthusiastic about the idea of the UK splintering into a number of devolved countries, each seeking direct membership of the EU. The concern was that such arrangements, however different the circumstances, could give succour to other nationalist movements within the EU, especially the Catalan independence movement in Spain. British prime ministers have always needed to balance the government by taking into account the political factions within their own party, but since 2016, as a hangover from the EU referendum campaign and a ministerial free-for-all, cabinet government and 229

THE GREAT BRITISH REB OOT collective responsibility broke down. Theresa May had to balance her cabinet with Leave and Remain supporters and in so doing struggled to unify her administration. There was repeated paralysis on key issues and stymied decision-making. There were record numbers of ministerial resignations, forcing May to tolerate public dissent and rebellious voting in the Commons. When Boris Johnson first took office as prime minister in July 2019, he sought to reshape the government in his own image, but faced similarly capricious circumstances. Much of the debate on reform has focused on the devolved governments. A fresh approach should also be taken on the way cabinets are formed and operate. With huge divisions and clashes commonplace in the post EU referendum period, the modern relationship between Parliament and the executive needs to be re-examined. As the IfG noted: ‘The Government tried to keep Parliament at arm’s length over Brexit . . . but MPs became more assertive, challenging conventions to ensure their voices are heard.’ Brexit tested the relationship between Parliament and the executive, and the frailty of the government’s position in Parliament complicated the passing of legislation. This stalemate and endless wrangling was, arguably, a major contributory factor to Boris Johnson’s decisive election victory in December 2019. The electorate seemingly had no stomach for the position taken by Jeremy Corbyn’s Labour Party, which involved new negotiations with Brussels and a referendum on the renegotiated deal. The public was also alienated by the declaration made by the former Liberal Democratic leader, Jo Swinson, who decided that the referendum result would be set aside and the decision of Parliament to implement Article 50, which had set Britain on the course for a voluntary exit from the EU, would be revoked. The political wrangling and uncertainty dealt an enormous blow to business and caused consumer damage. Yet, in spite of the dark pall cast, politicians were relatively impervious to the harm done and the need for a less divisive and more consensual politics. 230

GOVERNANCE Social media played its part in exaggerating divisions. MPs, journalists, policymakers and even the former permanent secretary at the Treasury, Sir Nick Macpherson,12 were quick to twitter and go on other media outlets to offer instant comments on events, some of it hostile and potentially offensive. The cycle of events speeded up, opinions were less judicious and the language used coarsened. Anger often won out over deliberation. As a journalist, I am a passionate believer in freedom of expression, but the pendulum has swung too far in favour of instant and unguarded responses, policymaking on the hoof and a carelessness that demeans serious politics, distorts truths and leads to poor decision-making. This is not fixable by a written constitution, by a re-commitment to collective cabinet responsibility or by redefining the Supreme Court as the ultimate arbiter of disputes between the different branches of government. Between 2016 and 2019, the combination of Brexit and a minority government left Commons votes on a knife-edge, with MPs consistently in disagreement on how best to leave the EU. A Remain Parliament was in direct conflict with the majority of the public who had voted for Brexit. This divisiveness underlined the need for a more durable political settlement. Questions about the relationship between Parliament and the executive had been raised in the past, but Brexit brought this issue into the open in a new, more urgent way. A battle about EU membership, fought partly over loss of sovereignty, saw the Commons wrench back that sovereignty from the people. Unlike the United States and other democracies, Britain’s upper chamber, the House of Lords, lacks the credibility or power to act as an arbiter on great issues of state. In the US, it is the solemn duty of the Senate to ratify treaties, such as trade deals, by a two-thirds majority. In the Lords, the best that can normally be hoped for is that drafting mistakes, omissions and poor judgements quickly are amended before the law reaches the statute books. With more than 780 members, it is an unwieldly institution, a meal ticket for former 231

THE GREAT BRITISH REB OOT party loyalists and a debating chamber for fading political lights. In spite of completing some worthy work on Britain’s future trade relations inside and outside the EU, drawing on the experience of senior economists and former ministers, when push came to shove on Brexit it was virtually voiceless except as an echo chamber. A more meaningful House of Lords with genuine legitimacy could have better healed the divisions in the Lower House. It is a supreme irony that the members of the Upper House include hereditary peers who have no democratic legitimacy at all. In fact several are the descendants of former slave traders.13 The only saving grace is that that they tend to be younger than their fellow members who are drawn from the political classes – rarely from the ranks of industry, technology, science, the arts and other professions. The Lords has become a byword for peers who only log in to collect their attendance fees, people who were rewarded for making political donations to one of the major parties and defeated second rate politicians who were given peerages so as to make up the numbers. As a student of political science half a century ago, the preoc­ cupation of the senior lecturer in the politics department at Southampton University, Peter Richards,14 was the prevalence of patronage in British politics. Down the decades nothing appears to have changed. The many attempts to cull the numbers, modernise membership and give the Lords more democratic legitimacy have been an abject failure. There was a window for reform during the 2010–15 coalition government headed by David Cameron, but it fell by the wayside after his coalition partner, the Liberal Democrat leader and deputy prime minister, Nick Clegg, failed to agree on constituency boundary changes that might have unlocked Lords reform. All efforts at change have proved unsuccessful so far. The campaign for reform could well be reinvigorated by Brexit and the first government with a solid majority since Tony Blair was prime minister between 1997 and 2007. The upper chamber’s role of 232

GOVERNANCE revising legislation called into question what was seen as a pro-remain Lords overstepping its powers and meddling with Brexit legislation. In the name of better governance, future administrations would be advised to reduce its numbers, better define its powers, introduce elections with fixed terms, find ways of increasing diversity and make sure that the brilliance of British science and academia is properly represented. It is arguable that a better equipped, more democratic Lords could have played a role in overcoming some of the most divisive issues, such as the Irish backstop which blighted politics in the period between 2016 and 2019. Among the early suggestions that emerged from Downing Street in 2020 was that the Lords should use the opportunity presented by the refurbishment of the parliamentary buildings to decamp to York, where the two chambers once held sessions in the 1460s. The issue of Lords reform could tie in with the future of the party system generally. Following the Tory–Lib Dem coalition years, the dominance of the Conservatives and Labour re-emerged in the 2015 general election, but Brexit changed everything. The main parties were split and the Lib Dems were relabelled as the party of remain under the leadership of Jo Swinson, who was elected as leader in 2019, but who lost her Scottish seat to the SNP in the 2019 general election. The growth of the Green Party and its cause, together with the insurgent Brexit Party of Nigel Farage, appear to have reshaped British politics forever. Hung Parliaments, coalition governments, minority rule and confidence and supply arrangements made it look as if that could well be the way forward for government in Britain, as it has long been on the Continent, but the return of a Tory government with a majority of eighty in December 2019 put an end to that for five years, if not two parliamentary terms. Britain could ill afford more years of bickering and divisiveness that allowed the great issues of the day, ranging from boosting productivity to adult social care, to be kicked into the long grass. Better ways of building divergent views into governance looked as 233

THE GREAT BRITISH REB OOT if they would have to be found, but the electorate found its own way of ending the deadlock by embracing a return to single party governance. Whitehall and the Civil Service have also found themselves under the spotlight. Brexit placed relations between ministers and civil servants under pressure. Leave supporters suspected that the Civil Service was institutionally anti-Brexit and that this was reflected in both the advice it gave ministers and its lack of preparedness for ‘No Deal’. This suggestion has been widely refuted, but a post-Brexit Civil Service will need to re-engineer. Boris Johnson’s senior adviser, Dominic Cummings, caused a stir with a blog calling for ‘super talented weirdos and misfits with odd skills’ to apply for new jobs within Number 10. Among those recruited by Cummings was a self-described ‘superforecaster’,15 Andrew Sabisky. His short career in government ended in February 2020 following widespread criticism of his views on a number of topics, including genetics and reproduction, in what was seen as a setback to Cummings’ ambitions to shake up Whitehall. However, the Cummings effect was also seen at the very highest level. When Boris Johnson conducted a cabinet reshuffle on 13 February 2020, he insisted that Chancellor Sajid Javid’s special advisers at the Treasury be placed directly under the control of the Prime Minister’s Office. Javid refused to comply and resigned before the government’s first budget. The Chief Secretary to the Treasury, Rishi Sunak, untried at the highest level of government, was slotted into Number 11. The episode was symbolic of the early struggles of the Johnson government in its attempt to shake up what it regarded as obstructionist attitudes at the highest level in the Civil Service. In early March 2020, the permanent secretary at the Home Office, Sir Philip Rutnam, resigned, making a public claim of ‘bullying’ by the Home Secretary, Priti Patel, a campaigner for Leave and a Johnson loyalist. Whitehall has seen the world through the prism of Brussels and prided itself on living within the rules, but the national interest had 234

GOVERNANCE now become subject to competitive bidding in the award of big commercial contracts. There was huge controversy, for instance, when, in June 2013, a £1.5 billion contract for 1,140 carriages for the new Thameslink rail service, traversing London from north to south, was awarded to Germany’s Siemens rather than the Britishbased Bombardier company. Similarly, after the financial crisis the UK rigidly adhered to the EU requirement that two of its biggest banks, Lloyds and the Royal Bank of Scotland, shed branches to its competitors because of EU rules disallowing state subsidies. Whitehall had developed a habit of adhering to the letter of EU regulations, thereby swamping the broader national interest. Johnson showed his determination to reshape government in the heat of the coronavirus crisis. In June 2020 he broke ranks with his predecessors, Tony Blair, Gordon Brown and David Cameron, by merging the Department for International Development with the Foreign and Commonwealth Office.16 The prime minister described the move as part of his plan for post-Brexit ‘global Britain’. His goal was to align the £13.4 billion overseas aid budget – set at 0.7 per cent of national output – with the UK’s foreign policy objectives and derided the Department for International Development for serving as a ‘giant cashpoint’ for too long. The move sent a clear signal that Johnson was not going to allow the immense disruption caused by Covid-19 to divert him from his Leave election agenda. A radical approach to governance will be needed if the UK is to succeed in its Brexit future. The switch should come easily enough to Britain’s global corporations, such as the drugs firm AstraZeneca, with its eyes firmly fixed on China, and the Johnnie Walker distiller Diageo, which has diversified away from Europe to fast-growing markets in the US, China and India. Whitehall departments also need to adapt to an increasingly global agenda. Accordingly, the former cabinet secretary, Sir Mark Sedwill, commissioned research into the future shape of the Civil Service. The prospect of Brexit has already led to changes with the creation of new departments such as the Department for Exiting the 235

THE GREAT BRITISH REB OOT EU (DexEU) and the Department for International Trade that are looking towards a more global future. The latter recruited ‘can do’ trade negotiators from around the world, people who had the knowledge and experience to make trade deals. Under the stewardship of Brexiteer Liam Fox, from 2016 to July 2019, intellectual capacity was provided by Permanent Secretary Antonia Romeo, 43, who had an impressive CV and the dynamism to sweep away traditional Civil Service scepticism about change. She was instrumental in bringing New Zealander Crawford Falconer into the department – recruited as the UK’s top trade negotiator – who slotted in as Second Permanent Secretary to provide the status required to be listened to by the Whitehall hierarchy. As the former New Zealand ambassador and permanent representative to the World Trade Organization before retiring and moving into academia, Falconer has the skill set needed as the UK approaches a new future without the crutch of EU trade negotiators. By reaching out to the best and the brightest, Whitehall sought to give itself the chance to stretch its tentacles beyond the EU and establish its independent trade negotiation skills. In some respects the delay in reaching a Brexit agreement was less harmful than it might have been, in that delay gave the Civil Service time to adapt and bring in fresh expertise. Liam Fox was succeeded by Liz Truss in September 2019, in the aftermath of Boris Johnson’s election as Tory leader in July of the same year. Truss was not diverted from her responsibilities by the pandemic. On 5 May 2020 Truss inaugurated discussions on a trade deal with the UK’s single most important commercial partner the United States. Days later, on 12 May, Truss opened negotiations with Japan on a bilateral trade deal. A month later in June 2020 she started formal trade talks with New Zealand and Australia. Both Commonwealth nations enjoyed enhanced reputations because of their skill in battling the deadly spread of Covid-19. Deals with New Zealand and Australia were viewed as a gateway to joining the Comprehensive and Progressive Agreement for Trans-Pacific 236

GOVERNANCE Partnership (CPTPP), a broader trading alliance that includes Japan, Singapore and Mexico. The road to a Global Britain, as pledged in the referendum and the December 2019 election, was being paved. Leaving the EU behind also reshaped the domestic political agenda. There had been some recognition by the major political parties that if Britain wished to boost its output and productivity, it had to look beyond London and the prosperous South East and embrace more localism. Indeed, regional governance and longterm investment in the regions was one of the big manifesto themes of the December 2019 general election. The breach in the so-called ‘red wall’, which for decades saw the Labour Party dominate constituencies in the North, underlined the aspirations of the people in these forgotten parts. It was no surprise when the Tory leader, Boris Johnson, who had single-mindedly concentrated his campaign in the North and the Midlands, immediately travelled to the North East to share his victory. The drive for greater ‘localism’ away from central government has both suffered and prospered in recent years. On the debit side, councils around the country have lost powers and funding, which has diminished their role and made what responsibilities they retain even harder to carry out. There is no appetite for wideranging council restructuring such as was undertaken in the 1970s and the 1990s. However, a restoration of powers – with a greater tax raising role – plus greater funding is surely possible. On the credit side, provincial England has seen more regional government and powers ceded to mayors in the major urban centres of Manchester, Birmingham and Bristol. Regional power has also been boosted by the decision of national politicians and highprofile commercial leaders to seek high office. In Manchester, the former Labour cabinet secretary, Andy Burnham, was elected mayor in 2017. The Tory former chief executive of John Lewis, the charismatic Andy Street, became the first mayor of the West Midlands in the same year. The election of 237

THE GREAT BRITISH REB OOT American style big city mayors serves to reverse the ‘Londoncentric’ effect, which is a trend that will likely continue to the good advantage of governance. The presence of influential mayors will be important as Britain embarks on new high-profile infrastructure projects such as HS2, which was designed to provide highspeed rail links from London, Euston through to Birmingham and Manchester (and eventually onto Edinburgh) and HS3, which is a high-speed link across the Pennines, designed to improve connections between the North West and the North East as part of a broader Northern Powerhouse plan, first embraced by former Tory Chancellor, George Osborne. Such bold and costly infrastructure plans will require strong and passionate political support if they are to overcome ‘Nimby’ (not in my back yard) and sundry financial objections. The bitter divisions exposed by Brexit have stimulated new thinking on governance. Conservative MP George Freeman, former David Cameron policy adviser and a free thinker, described in a series of collected essays17 how his New Conservatism was a crusade to tackle the great political challenges facing the UK. Only through a united country, Freeman argues, can we move forward. He considered six main themes on the road to creating a better led Britain: ‘Identity, Place and Belonging’ discusses people’s natural loyalties; ‘Opportunity Society’ deals with reforming schools, skills, welfare and public services; ‘Innovation Economy’ deals with unleashing innovation and enterprise to promote social mobility; ‘Responsibility and Social Justice’ is concerned about providing a safety net for those in need without debilitating state dependency; ‘Security and Insecurity’ explores military threats and reforms to aid trade; and ‘Culture, Community and Citizenship’ looks at shared values and the institutions that protect them. Freeman says, ‘If we’re going to answer the generational challenge, we’ve got to be brave enough to think beyond Brexit.’ The Freeman checklist is not unlike the big six themes outlined by the Bank of England’s Andy Haldane18 in a 2019 speech given at 238

GOVERNANCE St James’ Park, the home of Newcastle United FC. Tasked by the May government with heading its Industrial Strategy Council, the Bank’s chief economist ventured deeply into regional politics, the social sphere and economics in the search for the factors that will enable the UK to grow and prosper as it sets itself on a new global path. Better governance would create room for addressing those issues identified by Haldane that were in need of a fix post-Brexit. The themes identified by Haldane were transport and connectivity; schools and education; housing and shelter; high streets and social spaces; good work and fair pay; and money and finance. Haldane argued: The most striking feature of the Big Six is that they almost always are working well – individually and collectively – in thriving towns and cities, but are typically working poorly (if at all) in towns and cities that are struggling. For the first, there is a virtuous circle among the Big Six, a spiral of renewal. For the second, there is a vicious circle, a spiral of decline.

In Haldane’s view, it is these spirals that have generated ‘the wide and widening regional and local disparities between those areas forging ahead and those being left behind’. He concludes by saying: ‘The convergence of high skills, good jobs, sound infrastructure, quality housing and developed social spaces creates a crucible of creativity. There is mass flourishing innovation, investment, skills, jobs, pay and culture.’ With a flourish, Haldane suggested that this kind of approach was the secret to the success of the flowering of renaissance in Florence under Medici rule. The potential fracturing of the Union requires new constitutional thinking that can better accommodate nationalist desires and regional aspirations. As an undergraduate, I wrote my thesis on economic and political localism, more regional government and the need for some kind of assembly outside of London. In many ways this is the unfinished business of devolution. It was an 239

THE GREAT BRITISH REB OOT issue virtually unspoken in the December 2019 election. The campaign was dominated by Johnson’s chosen theme of ‘Get Brexit Done’. A sharp contrast emerged between Labour’s big state, Marxist-leaning manifesto solutions to governance and the Tory lighter touch approach. The contest was also shaped by the fading popularity of the Labour leader, Jeremy Corbyn, and the lack of urgency in the senior ranks to confront the stain of anti-Israel and anti-Jewish views in the sinews of the party. Labour’s manifesto outlined a series of transformational ideas designed to move economic decision-making to the regions. These ideas included moving civil servants out of London to run a network of authorities working on regional and green transformation. In parallel, it proposed a series of regional branches of an empowered British Investment Bank to work in the regions. The state-controlled Royal Bank of Scotland19 would be directed to make loans to regional businesses. As revolutionary and desirable as some of the ideas looked, they gained little traction. Critics saw a bureaucratic nightmare and had little confidence that Labour had any notion as to how to administer such a complex system. The issue of the democratic deficit was left hanging. Clearly, if the aspirations of the devolved countries are to be better accommodated, a new federal assembly or other arrangement could be designed. This might be something entirely new or it could be a way of reforming the Upper House at Westminster, turning it into an elected assembly that more accurately reflects all of the UK, primarily the devolved countries and the English regions. Potentially, it could meet out of London, although portable assemblies can be an expensive luxury as the European Parliament’s peripatetic switches from Brussels to Strasbourg demonstrate. As a matter of course, the cabinet should regularly meet out of London, with ministers holding ‘town meetings’ after their deliberations. Over the course of the electoral cycle, the Commons could hold at least one session a year out of the capital, dispensing with the flummery that surrounds parliamentary 240

GOVERNANCE procedures. New life could be injected into some of the great Victorian town and city halls across the nation. What is clear is that meandering away from Britishness, regionalism and the Union should not be an option. A more global and creative Britain also needs a sustainable form of capitalism of which it can be proud; for instance, it is fashionable in business and investment circles to embrace environmental, social and corporate governance agenda. Britain has long prided itself on being at the forefront of governance in business, but a series of scandals has blotted that record and shown there is still much to be fixed if, in the post-Brexit world, the UK can be a light unto the nations. The UK also needs to overhaul its corporate governance so that its business community is fit, well and trusted for the challenges that lie ahead. Whereas the UK prides itself on being at the frontier of governance reforms after having overhauled the shape of the boardroom, women, minorities and workers are still poorly represented. As important, corporate Britain needs to be alert to a broader range of stakeholders: the workforce, suppliers, consumers and climate change advocates. These were issues explored as long ago as 1995 by my former Guardian colleague, Will Hutton, in his agenda-setting book The State We’re In.20 Many saw Hutton’s work as a manifesto for Tony Blair’s reform-minded Labour Party. The idea of a stakeholder society was highly resonant and, unusually for a book grounded in economics, it became a bestseller. The concern must be that a quarter of a century later many of the issues raised by Hutton are still unresolved, and Hutton’s advocacy of long termism, as enshrined in Germany’s Rhineland-Westphalia capitalism, looks as far away as ever. It has long been my view that Britain has been ill-served by a system that is rigged in favour of finance rather than the broader contributions to society. We have seen these wider interests represented in recent takeover battles, for example the Kraft Heinz bid for Unilever in 2017, but in the past this has been the exception 241

THE GREAT BRITISH REB OOT rather than the rule. Too few of the mergers and acquisitions that have seen great swathes of corporate Britain fall into the hands of financially driven overseas predators have been judged on the grounds of what is best for all stakeholders. Indeed, during the EU referendum campaign in 2016, one of Britain’s leading-edge pharmaceutical companies, AZ, came under siege from its larger American rival Pfizer. The immediate response of the government and Whitehall was to welcome the transaction as a sign that Britain was still open for business. The French chief executive of AZ, Pascal Soriot, together with a determined board, decided that price should not be the only factor; it was the longer-term prospects for AZ as one of Britain’s leadingedge research companies with substantial R&D budgets that were important. After high-profile parliamentary hearings, Pfizer, incidentally headed by British citizen Ian Read, withdrew from the field of battle. There were rumblings from big battalion investors that an opportunity to cash in had been missed and AZ could never meet the sales targets it put forward in its defence. The government and moaning minnie shareholders could not have been more wrong. AZ’s leading-edge immunology treatments for cancer have come through with flying colours, offering hope to those so affected and delivering sales and earnings to investors. In an example of what is possible, AZ is one of the few UK global companies to have broken into the Chinese market and achieve double-digit growth there. The broader interest was well served. Corporate governance is a broad church. It encompasses the ways that companies are run, the makeup of boardrooms, the gender gap and greater diversity among upper management. More recently, social and climate change obligations have been added. The initial drive for better governance started in the 1980s as a result of a number of official reports into a string of UK business scandals and company failures. This led the government to order the tightening of slack standards. 242

GOVERNANCE The genesis came with an incident in the seas around the Canary Islands on 5 November 1991 in the shape of the disappearance of, and presumed dead, business magnate Robert Maxwell. His vanishing act from his yacht led to a public outcry as it emerged how he had so ruthlessly and fraudulently mismanaged his businesses. He had, among other things, made dodgy acquisitions, siphoned money from pension funds and traded when insolvent with no executives in position, or was plainly unwilling to prevent this. Added to this, there was a feeling that regulators on both sides of the Atlantic had failed to step in much earlier when they had good grounds to do so. By 1992, Maxwell’s companies filed for bankruptcy protection both in the UK and in the US. At around the same time, the Bank of Credit and Commerce International (BCCI) went bust, losing billions of dollars of its depositors’, shareholders’ and employees’ money. Another company, Polly Peck, reported healthy profits one year while declaring bankruptcy the next. Following this raft of governance failures, there was an urgent need to restore confidence for investors and the wider public. That challenge was taken up by industrial grandee Sir Adrian Cadbury, who chaired a committee whose aims were to investigate corporate governance and to suggest improvements to the system. The committee was set up by the audit enforcer the Financial Reporting Council, the London Stock Exchange and by the accountancy profession. Its final report was released in December 1992. Cadbury21 recommended the separation of the roles of chairman and chief executive on company boards and that accounting systems designed to mitigate corporate governance risks and failures should be voluntary and self-regulating. Cadbury’s findings have since been used to establish other codes, such as those of the OECD, the EU, the US and the World Bank. Political outrage over outsized pay settlements in the UK’s privatised utility companies such as British Gas led to calls for further reform. The task was assigned to the late M&S chairman, Sir Richard Greenbury.22 His probe, like Cadbury’s beforehand, 243

THE GREAT BRITISH REB OOT was set up by the CBI amid continuing concerns about the level of director remuneration. Greenbury addressed issues of accountability, responsibility, disclosure, alignment of director and shareholder interests, and improved company performance. Its key findings were that independent remuneration committees made up of non-executive directors should be responsible for determining the level of executive directors’ compensation packages, that there should be full disclosure of each executive’s pay package and that shareholders be required to approve them. Remuneration should be linked more explicitly to performance and set at a level necessary to ‘attract, retain and motivate’ top talent without being excessive. It also proposed that more restraint be shown in awarding compensation to outgoing chief executives, taking into account their performance and reasons for departing, but there was a fatal flaw in the Greenbury findings. His suggestion that pay and bonuses should be linked to retention of employees and to long-term performance led to the creation of the ‘Long Term Incentive Plan’, widely known as LTIPs. In and of themselves, such plans were often paid out in shares, which was a good idea. However, the practice was distorted, with LTIPs being layered upon basic pay, short-term bonuses and other benefits. The result was the opposite of what was intended in that it inflated reward packages. Moreover, pay or remuneration committees have proved to be toothless and over-influenced by executive demands. Often the committees are advised by pay experts who are incentivised to raise compensation levels. The consequence has been an escalation in the pay gap between the boardroom and the rest of the workforce. One of the most grotesque examples of the distortions in the system emerged in 2018 when the chief executive of York-based house builder Persimmon, Jeff Fairburn, was awarded a bonus of £100 million (later reduced to £75 million), which provoked the resignations of the company’s chairman and the head of the remuneration committee, and the eventual departure of Fairburn 244

GOVERNANCE himself. The ultimate insult was that Persimmon had delivered faulty and in some cases fire endangered homes while exploiting lacunae in leasehold law. It was a demonstration that all the voluntary rules and protections in the world will not prevent an abuse of the system. An effort to repair some of the earlier shortcomings was launched in 1998, which was headed by ICI boss Sir Ronald Hampel. The Hampel Report23 was set up by the Financial Reporting Council to review Cadbury and Greenbury. It came out against regulatory ‘box ticking’ and sought to underline good practice. Hampel thought that the need for accountability was being pursued at the expense of business prosperity. Boards should decide upon corporate governance, and dissenting shareholders could vote accordingly. Various further revisions pursuant to the Turnbull, Higgs and Walker reports were published in the ‘2009 Review of the Combined Code: Final Report’, which updated, refined and amended existing codes. The Cadbury, Greenbury and subsequent reports have, over time, been distilled into the Financial Reporting Council’s Corporate Governance Code. This sets out standards of good practice for listed companies on a number of subjects, such as board composition and development, remuneration, shareholder relations, accountability and audit. The Code established a number of areas where boards should change: engagement with the workforce; creating a healthy corporate governance culture; diversity and assured independence for non-executive board members; and transparent remuneration criteria. Onerous requirements were designed to put pressure on publicly listed firms to update practices that had fallen behind best in class. The reality of corporate governance often varied widely from the template. The result was that remuneration transparency had led to overcomplication; annual reports now contain dozens of pages of detail on incentive packages and the like, which only the most legalistic and financially proficient minds can follow. There has also been a tendency for big battalion investors to 245

THE GREAT BRITISH REB OOT ignore governance failings, such as chairmen and non-executives who remain beyond pre-set limits for as long as the share price is rising. One of the few politicians to take an active interest in governance was the Lib Dem Business Secretary, Sir Vince Cable, in the Cameron-led coalition government. In 2015, he convened a summit of senior business leaders and government representatives to establish the best way to reshape and improve corporate culture for the twenty-first century – without further regulation. The March 2015 summit discussed the next steps for improving corporate culture, putting transparency and employee confidence at the heart of every business. Cable said: Government has worked hard to set the right frameworks within which companies can improve their corporate culture. I have done a lot to address and improve corporate behaviour by prompting a shift away from short-term thinking, reforming executive pay and putting a greater emphasis on active stewardship by investors. However, improving corporate culture so employees feel valued, listened to, and confident about raising concerns requires further action.24

To address such gaps in practice, Sir James Wates, chief executive of the construction firm Wates, was charged to take a fresh look at governance in 2018. The so-called Wates principles25 focused on purpose and leadership, composition of boards, responsibilities, opportunity and risk remuneration, and stakeholder relationships. Among the pressing issues where progress was slow and continues to be slow is the gender imbalance on boards and in senior executive jobs. The lack of female representation among executives in the UK’s FTSE 100 companies is national disgrace and needs to be immediately addressed if the UK wants to be a forward-looking, gender-aware economy as it embarks on its adventure outside the EU. 246

GOVERNANCE By 2018 much of the City of London had accepted the principle that one-third of company boards should be comprised of women. Among the twenty-seven global investors supporting the initiative were the US investor BlackRock, JP Morgan Asset Management and Standard Life Aberdeen, all of whom had joined the ‘30% Club’ which campaigned for women to become part of the one-third objective. These investors have pledged to vote against boards that fail to appoint more women.26 Norway has been leading the charge for more female involvement in corporate life which, incidentally, is one of the biggest inward investors in Britain. In 2008 Norway obliged listed companies to reserve at least 40 per cent of their directorships for women or be dissolved. The Norway initiative has been successful up to a point; most listed companies now have boards of directors that meet the 40 per cent objective. According to the 2017 World Economic Forum’s Gender Equality Index, the share of female board members in EU countries has more than doubled since 2007. Norway is seen as the benchmark for equality in the boardroom and is ranked second among the 144 countries in the Index. As the pioneer country, Norway has a female prime minister, finance minister and the head of the powerful employers’ association. Further, all three parties in government are led by women. In the public sector, the majority of leaders are female, but the private sector lags behind its public sector counterparts; in 2018 just 21 out of the top 200 Norwegian firms had female chief executives. The Norway initiative has encouraged others to follow suit. By 2013, more than a dozen countries had set similar quotas at 30 to 40 per cent. In Belgium, France and Italy, firms failing to comply with their quotas faced sanctions such as fines. Germany, Spain and the Netherlands looked to quotas without sanctions, while Britain opted for guidelines. The case for more women at the top in corporate life is made strongly by management guru Anne Francke, who is chief executive of the UK based Chartered Institute of Management: ‘There is 247

THE GREAT BRITISH REB OOT a bunch of people sat around the table, often looking very much like each other. Let’s face it, white, middle-aged males of similar backgrounds reinforcing each other’s decisions, that’s what creates a lot of corporate catastrophes.’27 Francke is in no doubt that gender diversity is the first thing to get right, if only because women form 51 per cent of the population and not a minority. ‘If you make the workforce a good place for women, you make it a good place for everyone,’ she says. Francke reels off a series of stats showing how women are discriminated in the workforce. Men still earn 26 per cent more than their female counterparts, and they’re 40 per cent more likely to get promoted. ‘Male CEOs still enjoy bonuses about eight times higher than females,’ she adds. What does she think about the fact that, at present, there are just six (soon to be five) female FTSE 100 bosses? ‘It’s an absolutely appalling statistic. The number of executive directors in the Footsie has flatlined at about 10 per cent in the last four years.’ What is particularly exasperating, Francke argues, is that data produced by management consultants McKinsey show that if you have diversity you’ll outperform competitors by about 21 per cent, which could boost national output by £150 billion a year. The UK lags behind much of Europe – Norway, Sweden, France, Finland and Belgium – in terms of female representation. In 2015 a government-backed gender equality report28 compiled by former international banker and government trade minister Sir Mervyn Davies, set a target for FTSE 100 firms of 33 per cent female board members by 2020. It was never quite explained why a male rather than a female executive was picked for the task. The report, which opted for voluntary implementation, found that FTSE 100 companies had exceeded their target of having 25 per cent women on their boards since 2011 – previously women held just 12.5 per cent of directorships. Since then, the percentage of women on boards has risen from 22.8 per cent to 23.7 per cent, and the number of companies with at least 33 per cent women on their boards has increased from 248

GOVERNANCE fifty-three in 2017 to fifty-nine in 2018. However, the number of women holding executive directorships in FTSE 250 companies has dropped from 7.7 to just 6.4 per cent in 2018.29 Consumer goods group Unilever is among those leading the way. Since 2011, it has doubled the number of women on its board so as to constitute 50 per cent of its board members – the only company to achieve gender parity. Meanwhile, Marks & Spencer’s female board representation has risen to 41.7 per cent from 27.3 per cent. Drinks giant Diageo has gone to 40 per cent from 36.4 per cent, and is unusual in that it employs a large number of women in top executive posts. At drug maker AZ, as well as at Sainsbury’s, the proportion of women has risen to 33.3 per cent from 27.3 per cent. Rolls-Royce went from 7.1 per cent to 33.1 per cent, while HSBC rose from 16.7 per cent to 42.1 per cent Carolyn McCall, chief executive of the television broadcaster ITV, is among the FTSE 100 success stories. After receiving degrees from the University of Kent and the University of London, her foray into the business world began with construction giant Costain. By 1986 she had decide on a career switch and moved to the Guardian Media Group plc where she rose through the commercial ranks to become chief executive of the newspaper operations, and in 2006 she took the helm of the parent company. In 2010, McCall become chief executive of the budget airline EasyJet and immediately had to deal with a schedule disruption due to volcanic ash clouds, a spike in the price of oil and an air traffic controllers strike. During her time at EasyJet passenger numbers almost doubled, while also doubling the number of female applicants who wanted to become pilots under the ‘Amy Johnson initiative’. In 2018 she returned to the media world to run ITV at a time of enormous challenge from streaming rivals Amazon and Netflix, both of which had vast production budgets. McCall’s rise to the top and that of other women such as Alison Rose, who took over at Royal Bank of Scotland in 2019 to become the first chief executive of a UK high street bank, are the 249

THE GREAT BRITISH REB OOT exceptions. UK companies are hopelessly thin on top women executives, and the gender pay gap – the differences between what men and women earn in the same post – is a disgrace. The UK has the structures in place to become a global leader in this area and has the opportunity to unleash greater productivity, but it will require far greater shareholder activism and more alert monitoring of progress to get there. There is still much that needs fixing in Britain’s corporate governance regulations. A series of collapses, scandals and failures during 2018 and 2019, including the construction company Carillion, the café group Patisserie Valerie, the stores firm House of Fraser, the airline Monarch and the travel group Thomas Cook, have all illustrated accounting and governance failures. Audit has been too light and cosy and directors have helped themselves to big salaries while leaving employees high and dry. The implosion at fund manager Woodford in June 2019 exposed the vulnerability of ordinary savers, some 1.3 million of them, to poor governance standards and flaccid regulation. The business shutdown caused by Covid-19 in 2020 saw a raft of other companies go into administration, including the airline Flybe, the stylish Italian restaurant group Carluccio’s and the appliance and furniture rental group BrightHouse. The causes of these failures were different in each case, but there were common roots. In spite of all the corporate governance reforms made since the collapse of the Maxwell media empire in the early 1990s, too many company boards were not fit for purpose. Chairpersons have failed to challenge chief executives enough, senior non-executive directors are slow to represent the interests of major investors and there has been a cosy capture of the big audit firms. In his excoriating December 2018 review of the City, enforcer of the Financial Reporting Council (FRC),30 former Treasury mandarin and chair of Legal & General, Sir John Kingman, described the FRC as a ‘ramshackle house, cobbled together with all sorts of extensions’ that needed to be torn down and replaced. 250

GOVERNANCE Kingman proposed an independent statutory regulator, accountable to Parliament, with a new mandate, clarity of mission, new leadership and new powers. The then Business Secretary, Greg Clark, described the review as ‘excellent’ and pledged to take the recommendations forward and create a new independent body which would ‘build on our status as a great place to do business’. As with so many critical reforms to prepare the UK for post-Brexit life, the proposed new Audit, Reporting and Governance Authority was caught up in legislative and political sludge. A separate report into the actions of audit companies by the competition regulator, the Competition and Markets Authority, recommended widespread reforms designed to inject challenge into the system.31 The main proposals included the separation of the big four firms’ audit and consulting arms, but not a full divestment. To encourage competition from second line firms, it also called for mandatory joint audits involving the big four firms and lesser-known challengers. In May 2019, the investment bank Goldman Sachs disclosed it would be using Mazars, a French firm with a large City practice, as auditor of its European operations. A further review by the former chairman of the London Stock Exchange, Sir Donald Brydon, was released in December 2019 shortly after the election of Boris Johnson’s government.32 Brydon’s review called for radical changes to the audit industry. He proposed the creation of a new corporate audit profession, split from the big accounting firms. It proposed an end to accounts being certified as offering a ‘true and fair’ view, to be replaced by much broader audit reporting which looks at factors such as cash flow. The report also pointed out inconsistencies in the way accounts had been prepared, focused on inconsistencies and recommended that there should be more continuity between audit reports – pointing to changes in approach. Brydon also wanted to see greater independence of board audit committees and an end to conflicts of interest. As well as providing 251

THE GREAT BRITISH REB OOT audit services, many of the big accounting firms advised on a variety of other corporate decisions, ranging from environmental, social and governance practices to executive remuneration. In spite of the sweeping proposals for reform changes to governance regulation, changes to audits remain in abeyance. The new chief executive of the still unreformed FRC, Simon Dingemans, a former Goldman Sachs investment banker, left little doubt he would support reform of audit, advocating a full divestment of consulting arms. Dingemans resigned after less than a year in office. Such a change would end the conflict of interest that arises when consulting fees and matters of remuneration exceed those of audit. Britain has led the world on governance issues, and the big four audit firms Deloitte, PwC, KPMG and EY all have strong UK roots. However, the systemic failure during and since the financial crisis has led to a crisis of confidence in ‘big audit’, not just in Britain but worldwide. The unsatisfactory audit of the global football authority FIFA is blamed for failing to identify corrupt payments. A faulty PwC audit of the votes for Best Picture at the 2017 Oscar ceremony in Hollywood was a huge embarrassment for the firm, which led to an apology while offering a metaphor for a profession that had surrendered trust. The overriding reason why overseas investors flock to London, even during the Brexit nightmare, is their trust in Britain’s rule of law and fairness. Corporate governance and trust in audit is part of the infrastructure on which the UK’s worldbeating financial structure and the City of London was built. In late 2019, as forest and bush fires ravaged Australia’s blessed economy, and early in 2020 at the Davos World Economic forum, climate change came sharply into view as a governance issue. The financial risks of climate change was an issue first raised in an economic context by the then governor of the Bank of England, Mark Carney, in 2015. The issue was brought to broader public attention by the protest group Extinction Rebellion, which brought London to a halt during protests in 2019. Young people were converted to the cause by the inspirational activism of the Swedish 252

GOVERNANCE schoolgirl Greta Thunberg, whose call for a carbon-free future became a global sensation. The cause was adopted as a headline governance issue at the turn of 2020 by the world’s largest investor, Larry Fink. In his annual letter to chief executives of companies in which his $7 trillion of funds were invested, the chairman of Black Rock argued that ‘the evidence on climate risk is compelling investors to reassess core assumptions about modern finance’. Fink also announced that BlackRock would be disinvesting in mining firms in which 25 per cent or more of their income was derived from thermal coal. Climate change became the new frontier for corporate governance. Environmental, Social and Governance (ESG) investing has become a critical issue for the UK, which is one of the great centres of asset management on behalf of pension funds and savers throughout the world. Britain’s status as a financial centre means that it must retain the highest standards as it negotiates new trading relationships around the world. Restoring and maintaining trust in the law, regulation, enforcement, governance and audit will be critical as the UK readies itself for a new role in the world. Openness to foreign investment has to be in the national interest and needs to be reinforced by the highest standards of scrutiny and governance. Meeting carbon reduction targets needs to be at the forefront of every decision made by company boards and the government. The coronavirus embedded the view that pursuing a green agenda will be key to pulling the UK and global economy out of slump. Investment bankers Goldman Sachs argue that clean technology will have a ‘major role to play in upcoming economic recovery’.33 It estimated $1 trillion to $2 trillion will be spent on green infrastructure creating up to 15 million to 20 million jobs worldwide. Seizing that carbon reduction opportunity will be critical to the UK as it goes global and overcomes the shock of Covid-19. Leaving City reform and the environmental agenda to fester on dusty shelves cannot be an option. Business governance must be 253

THE GREAT BRITISH REB OOT cleaned up in tandem with convincing and durable constitutional change. It would be a huge mistake if the Johnson government of 2019 does not press on with governance changes, which should go hand in hand with reclaiming the UK’s economic sovereignty. One of the challenges outside the EU will be to restore abovetrend growth to the UK. That has become even harder given the depression era economic subsidence associated with Covid. The current wisdom is that public investment in the shape of better infrastructure, connectivity and a low carbon approach will eventually deliver the higher productivity and growth needed if the UK is to reset its economic ambitions. The next chapter examines the construction, connectivity and green agenda that will play a crucial role in building a better future for Britain.




When the capital development of a country becomes a by-product of the activities of a casino, the job is likely to be ill-done. John Maynard Keynes, General Theory of Employment, Interest, and Money, 1936 A visitor to the UK from Mars could not but be struck by the contrasts. A nation of shining new office towers but congested roads; handsomely restored regional town halls but chugging, slow Victorian railways: the earliest adopter of mobile technology, but with signals that fade in our biggest cities; and a beautiful landscape despoiled by wind farms, but with a constant threat that the lights might go out. The UK is a country where there is not much that Britain’s major political parties agree on, but the one theme common to the Conservative and Labour parties in the bitterly contested 2019 general election was that, after a decade of austerity, the UK needs to invest for the future. The priorities of digital transformation and a lower carbon Britain outside the EU look even more desirable after the Covid-19 experience. In the 2019 campaign former Labour leader Jeremy Corbyn promised a magnificent transformation focused on a greener Britain and planned to invest £200 billion to achieve this goal, but the number was so big – grafted on top of other promises – that it was unbelievable. The Tories were more modest in their aspirations, but recognised that an age of super low interest rates offered an opportunity to rebalance Britain by focusing more on the North and other 255

THE GREAT BRITISH REB OOT left-behind parts of the country. Britain was the master of capital investment in the Victorian era. Much of the infrastructure for creating the railways, Isambard Kingdom Brunel’s Clifton Suspension Bridge and the Bazalgette sewage system in London was designed and built in that period. It was the energy and vision of nineteenth-century social pioneers such as Edwin Chadwick, a passionate advocate of sanitary reforms, as much as industrialisation that drove public investment.1 In these more modern times, long-term investment for the greater public good is not something that the UK has excelled at. Margaret Thatcher’s free market revolution of the 1990s saw a flowering of private enterprise and growth. Developments such as London’s Docklands and Canary Wharf, Salford’s media city, the Cardiff Bay development and Michael Heseltine’s renaissance plans for Liverpool arose from the ashes of Britain’s industrial past. In Scotland, EU regional investment brought a modern road system to the Highlands. However, a combination of the electoral cycle, the focus on short-term quarterly results of public companies and Britain’s painstaking planning system has meant that public infrastructure has played second fiddle to private investment. As a result, the nation’s infrastructure – its airports, roads, railways, flood defences and much else – has been stretched to the limit. Under the stress of a surging population, even the much admired Bazalgette sewers met their Waterloo too often after heavy rains; crews training for the annual Oxford–Cambridge boat race have had to contend with raw sewage being spewed into the Thames. The casino ‘winner takes all’ economy neglected the public good. Even when house builders had been mandated by planning requirements to add affordable housing to their developments, they let consumers down by producing shoddy, sometimes unsafe, homes, as well as by scaling back availability and restricting the use by tenants of adjacent public space. However, the post-financial crisis era created a new opportunity for infrastructure. In the years since 2008–09, governments in 256

INFRA STRUC TURE the advanced countries have largely relied on monetary policy to fire up output. The big central banks – the Federal Reserve in the US, the Bank of Japan, the European Central Bank and the Bank of England – have pumped trillions of dollars into their financial systems to encourage lending to businesses and consumers. Interest rates have fallen to record low levels and are in negative territory across Europe. Unprecedented low interest rates have changed attitudes towards borrowing for investment in infrastructure. In a conversation with journalists on the fringes of the IMF meetings in October 2019, former Tory Chancellor Sajid Javid was unequivocal about this: ‘The big thing that has changed in the last few years is the fact that we have these record low interest rates that I believe will be low for a long time,’ adding that negative real and nominal interest rates were a very unusual situation. ‘I traded the bond markets for twenty years and have never seen anything like this,’ Javid told us.2 As the UK moves away from its former partners in Europe and looks more broadly across the world, it needs to prepare itself for the challenge. A critical part of this is to improve productivity. The UK’s productivity, i.e. output per worker, has been lamentable, lagging behind that of its competitors. As productivity drives growth, which in turn fuels the public finances, it is ignored at the nation’s peril. Among the reasons often cited for low productivity is the tendency of employers, both public and private, to invest in workers in Britain’s labour market rather than buy new equipment, be it physical infrastructure or technology. Further, an outward looking economy needs the very best in connectivity – be it ultrafast broadband or more capable airports and shipping ports – if the UK is to fend for itself as an entrepot nation. The conventional wisdom a decade after the financial crisis is that monetary policy and interest rates have been pushed to the limits in promoting output and growth. That has not been wholly true. After the outbreak of the Covid-19 pandemic in 2020, central banks were the first to the economic barricades. In the UK the Bank 257

THE GREAT BRITISH REB OOT of England cut interest rates to 0.1 per cent, the lowest level since the Bank was formed in 1694. It also ploughed hundreds of billions of cash into the financial system by buying government bonds on the open market. Nevertheless, there is broad accord across the political spectrum that fiscal policy will need to pick up the slack. Investment in infrastructure, with the aim of boosting long-term productivity, is widely favoured. The IMF, long regarded as fiscally conservative, has come around to the idea that Keynesian economics – boosting public investment to support growth – has a role to play in averting slumps and boosting global output. ‘Monetary policy cannot be the only game in town,’ remarked the fund’s top economist, Gita Gopinath.3 ‘It should be accompanied with fiscal support where fiscal space is available, and policy is not already too expansionary.’ She urged advanced countries to ‘take advantage of low borrowing rates to invest in social infrastructure’. The UK finds itself at a crossroads when it comes to infrastructure. Planning and work is underway on what has become known as the three H’s: Heathrow’s third runway; the Hinkley Point nuclear plant in Somerset; and HS2, the high-speed rail link running from London Euston to Birmingham and onto Leeds and Manchester. All of these are, in my view, essential for Britain’s future as it looks to both Europe and the rest of the world for future growth, but all have been fraught with controversy over environmental impacts, surging costs and planning issues. Moreover, all three projects – gobbling up tens of billions of pounds – are largely focused on the South. There is also a prevailing scepticism among large sections of the chattering classes about the UK’s ability to deliver big infrastructure. There is much talk about the need for the UK to walk before it runs. This means delivering meek projects, such as urban roundabouts, cycle lanes and commuter lines in the North, rather than wasting resources on big prestige projects that gobble up resources, which are rarely delivered on budget and do not always marry with modern climate change objectives. There is a lack of imagination 258

INFRA STRUC TURE and no appreciation that big infrastructure not only creates jobs and skills in the building phase, but is a catalyst for economic development. Fresh ideas such as the proposal for a bridge between Northern Ireland and Scotland, discussed in the autumn of 2019, would have the capacity to deliver political connections and bring greater prosperity to communities on both sides of the Irish Sea. The obstacles are considerable, not least accessing the deep waters that have been used as a dumping ground for surplus ordnance from past wars which make bridge or tunnel building potentially hazardous. That may make it hard to pursue improved connectivity between these two parts of the UK when the Union itself is under strain. What works for go-ahead Scandinavia, in the shape of the 16 kilometre Øresund Bridge connecting Denmark to Sweden by road and rail, could be a similar catalyst for growth for two devolved parts of the UK. However, there is a lack of conviction that projects begun now will benefit the generations to come, or boost lagging productivity. Airports are a big part of the infrastructure theatre. Heathrow handled a record 80.1 million passengers in 2018 and is London’s window on the world. On its best days in 2019, it handled more than 260,000 travellers. Under normal circumstances the airport operates at near to full capacity, which means that even a minor computer glitch can cause chaos. The outbreak of the Covid-19 pandemic in 2020 changed that dramatically. As travel was curtailed by governments around the globe Heathrow became a ghost town. The emptiness gave succour to climate change campaigners who abhor the heavy use of fossil fuels involved in air travel, the noxious emissions and noise pollution. What they fail to recognise is that for Britain as an open economy, hosting one of the world’s great financial centres and attracting record levels of private investment from around the globe airport capacity is a lifeline for output, prosperity and jobs. Pre-Covid business passengers arriving on a ‘red eye’ from the Pacific or North America will have been more than familiar with 259

THE GREAT BRITISH REB OOT the pilot’s announcement as London comes in sight. He will congratulate himself and the crew for arriving early or on time, and then reveal that there are no landing slots available. What then follows is twenty minutes of tedious circling over the Home Counties. If the passengers are really unlucky, there awaits a crowded and bumpy bus ride from one end of the airport to the other and a lengthy baggage delay. Economy and premium passengers face exactly the same uncomfortable conditions; it is not an experience that reflects well on one of the world’s greatest cities. That is why the Court of Appeal’s decision in February 2020 to strike down further work on a new third runway, because the plans failed to comply with the Paris Agreement on climate change, was such a bitter blow. As John Holland-Kaye, the chief executive of Heathrow, observed: ‘Heathrow is more than just another airport. As the UK’s only hub airport, we connect goods from all over Europe to global markets.’4 Work on the £20.3 billion Hinkley Point power station being built by Électricité de France started in December 2018. This project is creating 26,000 jobs for construction workers, engineers and apprentices. When completed, the two giant new nuclear reactors, the first in a new generation of nuclear power stations in the UK, will provide low-carbon electricity for around 6 million homes. The sniping began as soon as the contracts were being signed. One opponent, the environmental campaigner Jonathan Porritt, described it as ‘The Most Expensive White Elephant in British History’.5 The then Chancellor, George Osborne, who was instrumental in bringing in Chinese financing, was widely attacked for setting the ‘strike price’ – the cost of electricity to the grid – too high at a time when the costs of low-carbon energy had been falling. The price to businesses and consumers looked excessive. If, as will be necessary, Britain is to have a reliable baseload of nuclear power, the next super reactor to be built (at Sizewell on the Suffolk coast) will need a different financing model. There also was criticism of the technical obstacles that needed to be overcome at Hinkley and the likely escalating costs, as plants 260

INFRA STRUC TURE of a similar design in Finland and Brittany experienced serious delays. Yet Hinkley, when completed, will be capable of supplying up to 7 per cent of the UK’s energy needs. It will allow older, more wasteful nuclear plants to be decommissioned while providing a baseload for Britain’s future energy security. The electric car revolution, one of the main planks of a carbon-free economy, will be halted in its tracks if the UK lacks consistent electricity generation facilities. Without a reliable energy supply, the capacity of the UK economy to expand and prosper will be seriously undermined. When completed, Hinkley will make a major contribution to the UK’s move to reduce carbon emissions. It is calculated that the electricity generated by its two reactors will offset 9 million tonnes of carbon dioxide emissions a year over its sixty-year lifespan. Hinkley is far from perfect. The strike price is too high, the engineering has proved problematic in similar plants and the security services initially had concerns about Chinese involvement. There is also the possibility that control technologies designed by Rolls-Royce may be plundered, as well as the risk of embedded data theft. Admittedly, the risk associated with big infrastructure projects is high, but the dangers of not putting in place reliable generation – rather than depending on the wind to blow or the import of natural gas – is significant. The HS2 rail contract has been under almost constant attack from the time it was proposed. It has been a poison chalice, along with Heathrow, for those occupying the role of Secretary of State for Transport. As a one of the few supporters in the media of big infrastructure, I was briefed on the project by both Justine Greening (2011–12) and Chris Grayling (2016–19). They, together with other holders of the transport portfolio, were under constant pressure to make the case for one of the most imaginative projects of recent times – in the Commons, in the media and to the wider public. Much opposition welled up from the Tory heartlands where people were concerned about trains hurtling past their back gardens at 200 miles an hour plus, thereby blighting the value of their homes and despoiling ancient forests. 261

THE GREAT BRITISH REB OOT These objections led to some of the most thorough environmental impact work ever done in the UK and the ‘gold plating’ of the path of the railway, with expensive tunnelling and landscaping designed to calm the critics. The designers of the project chose to base their original cost on projections from similar high-speed projects in continental Europe. In so doing they hopelessly failed to take on board major differences, including planning constraints and very different geographies. It was always planned that HS2 would connect major cities in the UK, which meant working with, or alongside, existing infrastructure and stations along the route. This was a major difference to the high-speed railway, the TGV, which connects Paris to the south of France. The reaction to the project away from the capital and the Home Counties that surround London has been remarkably different. HS2 has offered the prospect of unleashing regional economic development by connecting the Midlands and the northern cities of Leeds and Manchester more closely to London. Development is being speeded up in Birmingham and Nottingham on discarded industrial land along the length of the track. A proposed HS2 hub at Toton near Nottingham has, for example, attracted the interest of national and international investors after outline planning permission was granted for the construction of a mixed-use scheme of retail, office space and up to 800 much needed homes. Demand for commercial space in Birmingham is on the rise because of the project. ‘It has made occupiers make decisions more rapidly, because it was another tick in the box for Birmingham,’ report agents Knight Frank.6 Local growth plans for the high-speed rail link suggest that almost 500,000 new jobs will be created at HS2 station sites and 9,000 homes will be built around these stations, including new garden villages. ‘My experience says we’ll see more, and this is only the beginning of the spread of wealth HS2 can bring by joining up Britain,’ argues HS2 chairman, Sir James Morgan.7 Even if Heathrow, Hinkley and HS2 progress – as they should do – there is still much more to be done. Far more attention needs 262

INFRA STRUC TURE to be paid to the UK’s role as a digital pioneer. That requires a huge step up in investment in fibre cable, ultra-fast broadband and the digital super-highway. Historic lukewarm commitment by the nation’s flagship telecoms company, BT, has left the UK flailing in the slipstream of ultra-fast broadband economies such as South Korea, Japan and Spain, all of which have broadband speeds and capacity that the UK can only aspire to. For instance, Spain smartly used the spare capacity in its economy after the financial crisis to invest heavily in broadband so as to assure a better digital future. In the December 2019 general election, both the Conservatives and Labour proposed upping the scale and speed of broadband coverage using public funds. Labour was most radical, pledging a £20 billion programme to supply free broadband to every home in the UK. Labour unsheathed even more eye-catching proposals. It would create a new British broadband service by nationalising Openreach, the network arm of BT, and then spend £15 billion extra (on top of the Tory’s £5 billion) rolling out ‘free’ broadband across the land. Future maintenance and upgrades of the system would be paid for by a digital tax levied on the global internet giants. It first estimated that the annual cost of maintaining the system would be £230 million, but this figure rose to £579 million when errors in its costings were revealed. A new leadership team at BT, the main provider of telecoms infrastructure, recognises the significance. Lockdown in spring 2020 illustrated the importance of home working and digital connections in keeping the wheels of commerce turning and maintaining employment levels. In May 2020 BT’s chief executive Philip Jansen suspended the company’s dividend to shareholders and pledged to invest to deliver superfast, fibre broadband to 20 million more homes.8 The government is not generally good at delivering large-scale IT projects, as was learned with the computerisation of the NHS’s records. But it demonstrated it could rise to the occasion when it came to distributing funds to furloughed employees and the 263

THE GREAT BRITISH REB OOT self-employed when the Covid-19 health emergency erupted in 2020. However, delivering broadband is largely about digging up roads and threading fibre cable through existing pipes and ducts, so it is as much a physical infrastructure project as anything. The last time anything so bold was tackled was house building after the Second World War. The Tory government of Harold MacMillan delivered a record 400,000 new homes a year in the 1960s. If Britain, already Europe’s leader in online shopping and services, is to remain at the cutting edge of the digital revolution, a bold new approach, based on competitive free markets rather than the dead hand of the state, will be needed. When I spoke with the then chief executive of Ofcom, Sharon White,9 in late 2018, there was clear dissatisfaction with Britain’s pedestrian rate of progress on superfast broadband. White noted how our lives had become increasingly dependent on the digital economy and that take off has happened much faster and on a much greater scale.10 ‘It ought to be ubiquitous and we haven’t really had a strategy for ubiquity,’ White observed. In her view, the key problem at the time was that rollout was in the hands of a private regulated monopoly (British Telecom) that liked to talk about its past investment successes, not its future rollouts. A major barrier to ultra-fast broadband in the UK were legacy issues at BT. In the recent past, the focus has been on retaining customers and freezing out the competition rather than giving the digital economy the ultra-fast broadband it needs. Instead of installing fibre optic cables, BT has spent years propping up its legacy systems of copper cable. However, there is recognition that competition from CityFibre, Virgin (now owned by America’s Liberty), Vodafone and newcomer Hyperoptic will require BT to raise its game. Subsequent management changes at BT have helped to crystallise these shortcomings and bring more focus to the rollout of superfast broadband. The telecom firm’s South African chairman, Jan du Plessis, was clear from the day he took on the top job that he felt BT had lost its way and needed to think of itself as a national infrastructure champion. 264

INFRA STRUC TURE The arrival of Philip Jansen as chief executive in February 2019, who had a strong background in online enterprises, also brought a change in attitude. Jansen described the need for full fibre broadband in the UK as a ‘no brainer’ and argued that it should be a ‘top priority’, not just for BT but for the government. ‘Whoever is sitting in that seat in Number 10 will understand that fibre and digital infrastructure needs to be built at a rapid pace,’ he argued. ‘I hope it’s up there at the top of the list.’11 Talking about it and getting there is a different matter. BT has been trapped by its history. Its problems have included a treacle layer of bureaucracy that has inhibited decision-making. Its global network of ambitions, accepting that they have kept the Union flag flying around the globe, have been an enormous burden for successive managements who have struggled to make the contracts pay. The biggest distraction for former chief executive Gavin Patterson, who parted company with the business in 2019, was an accounting fraud in Italy which gobbled up £500 million of shareholder funds. He also struggled with Ofcom chief executive Sharon White, who forced structural (but not corporate) separation between BT and its infrastructure arm, Openreach. Jansen embraced that separation and could, when the time is right, float Openreach off as a separate entity. The UK’s lagging investment in full fibre broadband sticks out like a sore thumb. In South Korea there is 78.4 per cent coverage while in Spain there is 51.75 per cent. The UK sits at a lowly 1.52 per cent. As a fully integrated part of BT, Openreach has long been seen as a huge obstacle to competitors. Among other things, it controls the exchanges and access to the polls and ducts. White held a series of roundtables in 2018 aimed at persuading Openreach to change its behaviour and be more accommodating. White knew from the Spanish and Portuguese experience that you can change regulations to provide more access to legacy infrastructure, but changing practices on the ground is very different. It requires tougher regulation and a more helpful attitude to put pressure on BT to change. 265

THE GREAT BRITISH REB OOT Technology will also play a big role in forcing change. The arrival of 5G12 mobile networks will provide a leapfrog above existing capabilities on mobile. It promises to be up to 100 times faster than previous generation 4G networks and 2,000 times faster than 3G. The determination of the Boris Johnson government to make the leap to 5G brought into sharp relief Britain’s problems in pivoting towards the US in the post-EU world. The fastest way of delivering 5G was to deploy the Chinese firm Huawei, which had already been granted a significant role by BT to build out ultra-fast broadband. The Trump administration, with real justification, regards Huawei as a security threat and urged the Johnson government to desist. In January 2020, the UK’s National Security Council gave its go-ahead to build the ‘non-core’ parts of Britain’s 5G networks, limiting Huawei Technologies to 35 per cent of the network contracts.13 It did so under intense pressure from Britain’s mobile firms EE, controlled by BT, Vodafone, O2 (part of Spanish owned Telefonica) and Three (owned by Hong Kong based Hutchison). The operators saw Huawei as capable of building out 5G more cheaply and faster than European contractors Ericsson and Nokia. Britain’s own telecoms equipment champion, Marconi, once part of the late Sir Arnold Weinstock’s GEC, largely ceased to exist two decades earlier as a result of financially driven, irresponsible management. Johnson’s decision predictably brought about the wrath of President Donald Trump. In a heated telephone call, the president berated Johnson after he rejected the US request to ban Huawei Technologies.14 Britain’s Huawei defiance was seen in Washington as a potential new obstacle to an eventual new free trade deal between the UK and the United States. The US is currently engaged in a toe-to-toe struggle with China over technology and its blatant disregard for trade rules governing intellectual property. Among other things, in 2020 the US National Security Council won a high-level battle that sought to prevent China, with the aid of an African bloc of countries, from seizing control of the World Intellectual Property Organization – a UN 266

INFRA STRUC TURE agency. The US argued that allowing China to seize control by taking on the role of secretary general would be tantamount to ‘letting the fox into the chicken coop’ – as China is responsible for 85 per cent of the world’s intellectual property theft. The 5G decision demonstrates vividly how difficult it will be for the UK to navigate a path between two geo-political powers. Tensions increased on 28 May 2020 when the Chinese parliament approved a new security law for Hong Kong15 provoking strong reactions from the US, Britain and its allies, leading the UK to revoke a role for Huawei in 5G networks. Moreover, the long-term gains to be had by allowing the Chinese a substantial role are questionable, but 5G will not obviate the need for a huge roll out of fibre because the mobile network, while much faster and responsive, will still be patchy and run for commercial objectives rather than the greater public interest. A majority fibre backbone network will still be needed. The strangely conflicted view in government on the need for infrastructure investment on the scale of the post-Second World War Marshall Plan for the restoration of Europe is personified by Prime Minister Boris Johnson. As mayor of London from 2008 to 2016, Johnson was enthusiastic for new infrastructure. He invested heavily in bicycle lanes, much to the distress of London cabbies. He backed greener double-decker buses in the Routemaster tradition and supported a garden bridge across the Thames, later cancelled by his Labour successor, Sadiq Khan. Johnson also had grand ideas that failed to gain traction, for example, for a new London airport (to eventually replace Heathrow) on the Thames Estuary. His was an imaginative approach based on the success of Hong Kong’s construction of a new international airport from scratch on the island of Chek Lap Kok. The Hong Kong international airport is connected to the business centre of the territory by a series of bridges, new multi-lane highways and high-speed rail links. However, in 2015, the same politician, with a reputation for changing his mind as mayor of London, threatened to ‘lie on the ground in front of those bulldozers’ to stop expansion at Heathrow.16 267

THE GREAT BRITISH REB OOT Johnson was originally unenthusiastic about HS2 and its escalating costs when he took over as Prime Minister in July 2019 and immediately ordered a review by former chairman, Douglas Oakervee. After initial leaks suggesting that the costs of the project had become unacceptably high at £106 billion, the review gave the project the go-ahead. Doubtless, the soaring cost of the high-speed rail link has damaged public support and passions still run high, especially among residents of the Chilterns through which it runs. When I wrote an article in July 2019 in favour of the project and a visionary programme of infrastructure investment, I received a number of abusive letters from readers. One complained that the value of his house had been slashed because of its proximity to the route of HS2. He suggested that it would be fitting if I lost my house and much worse, which I won’t repeat here. Suffice to say, when it comes to visionary new infrastructure, the power of local interests can be overwhelming. Moreover, past failings to deliver on time have also caused disillusionment. Crossrail 2, the new south-east train system that runs through London, from Reading and Heathrow to the west through 42 kilometres of new tunnels under London to Shenfield and Abbey Wood in the east, is a case in point. Described by its Tory backers as Europe’s biggest infrastructure project (before HS2 picked up the slack), it has been beset by technical malfunctions, construction delays at major new stations and rising costs. The complex engineering project was originally scheduled to be opened by the Queen in December 2018, and officially named the Elizabeth line in her honour. However, the original cost of £14.8 billion soared first to £17.6 billion and then £18.25 billion. The complexities of building a new line under London, which integrates with existing lines and stations, cannot be underestimated. At Whitechapel in London’s East End, where one of the two stations under construction fell behind schedule, the cost climbed by 500 per cent to £659 million. Among the special safety measures to be undertaken for underground workers was an emergency 268

INFRA STRUC TURE exit for the crews. Above ground, the enlarged station required construction of a new entrance and a cavernous ticket hall. Unseen to the passengers across the whole system are thousands of miles of communication cables and wirings, which are linked to a control centre at Romford in Essex.17 The opening has now been delayed until the spring of 2021, at the earliest, as technical problems, mainly with aligning complex, computerised signalling systems, are ironed out. When it is up and running, the Elizabeth line is expected to carry 170,000 passengers a day. In 2019 at a London Assembly meeting hearing, the chief executive of Crossrail, Mike Wild, defended the delays: ‘If you go to Tottenham Court Road and Farringdon, they are impressive developments, you think they look ready to go. But behind the mask there is a lot of integration work to do . . . it’s complex work and we can’t take any shortcuts.’18 The delays have been tragic in that they have undermined faith in the UK’s ability to deliver big infrastructure projects on time and on budget. This is despite the fact that the project is being managed by Transport for London, which is generally highly regarded for its engineering skills. What critics of big infrastructure often fail to grasp are the economic benefits and the improved productivity and growth they unleash. Anyone tracing the path of Crossrail through London out to the less prosperous suburbs to the east cannot fail to see the commercial benefits it brings with it. The swelling costs of big infrastructure are alarming and show a tendency to gold plate projects in the UK. One of the reasons why HS2 has become so costly is because of its decision to tunnel under hills wherever possible, to divert tracks around ancient forests when necessary and much more. But there is another aspect to this; HS2 will take people off the roads and put them onto public transport. It will be the equivalent of a new motorway, which will relieve pressure on commuter routes and make a huge contribution to the decarbonisation of the country at a time when climate change has moved close to the top of public dialogue. Primarily, it 269

THE GREAT BRITISH REB OOT is an investment for the long-term. The benefits will be felt for decades and will be multigenerational. Among the backers of HS2 is Sir John Armitt, the 73-year-old chairman of the National Infrastructure Commission, who has a lifetime of experience in delivering big projects, including the West Coast Mainline and the London Olympics. ‘There is bound to be resistance,’ says the lanky Armitt, who is as enthusiastic as ever about bringing Britain’s creaking Victorian infrastructure up to date: You inevitably have opposition [to HS2] in the built up areas around Camden [in north London] . . . and people in the Chilterns, but when you talk to the people who are going to get the connectivity and you look at the centre of Birmingham, with the massive redevelopment that is taking place, undoubtedly on the back of optimism about High Speed 2 and the desire of the cities of the North, you find the majority of the people who will be affected by and benefit from it will support it.19

Armitt is dismissive of the whingers. With willpower and sensible talks with the contractors, he is convinced even the biggest projects are capable of being delivered for the price agreed. Armitt told me: When we did the upgrade to the West Coast Mainline at Network Rail it was going to be £12 billion. We said we could only afford £8 billion. We sat down with the contractors and in the end it cost £8.3 billion. One has to challenge government on these big projects and be more demanding on the affordability of the scheme in the same way as a private developer would . . . don’t tell me I can have all sorts of bells and whistles. Keep to the budget.

One of the architects of the HS2 project, former chief scientific adviser at the Department for Transport, Professor Roderick Smith, believes the purity of the project has been betrayed. Smith’s model for HS2 was the Japanese high-speed train system which had 270

INFRA STRUC TURE provided a huge boost to the Japanese economy after it went into service way back in 1964. He argued that the success of the Japanese high-speed rail line between Tokyo and Osaka was because it was a sealed system – its trains did not run on the rest of the rail network.20 In his view, the present plan was intended to fit in with the conventional inter-city system. This would mean that all the weaknesses of the current network would be replicated. Major disruptions on cross country lines or the West Coast Main Line would mean delays on HS2 and the loss of hard won punctuality. If the Smith model, based on long study of the Japanese system, were deployed, HS2 would bypass old city centres. Instead there would be new intermediate stations, known in Japan as the ‘pearls on the necklace’ because of the way they stimulated economic development in these new areas. Finally, he argued, the proposed speeds of up to 250 mph were unnecessarily expensive over relative short distances; lower speeds would be environmentally safer. Smith may well be right when he said that the use of existing termini, such as Euston in north London, was crazy because of the expense and disruption cause by the conversion. He would have preferred to see Old Oak, one of the Crossrail stations, as the main terminus. His arguments make some sense, except that HS2, by fitting in with existing inter-city routes, can better fulfil the government’s objective of bringing economic development back to declining towns and cities in the Midlands and the North. Indeed, a halo effect has already begun. Yes, reducing speeds might lower costs and ease environmental disturbance, as some studies have suggested, but it would also weaken the case that was made for HS2 in the Commons and elsewhere, which focused on the commercial advantages for business people moving between London, the Midlands and the North, and eventually Scotland. If it leaves people free to switch from air to rail, it could also lower the carbon footprint of some enterprises. For post-Brexit Britain, projects such as HS2 not only provide tens of thousands of jobs, they also help to resolve the regional 271

THE GREAT BRITISH REB OOT income imbalance between the wealthy South East, bolstered by the City of London, and the ambition of aspirational cities further north. Selling HS2 to the public has been tricky and it might have gained more political support had preparations begun in Manchester rather than Euston Station in the heart of London where so much big infrastructure, including Crossrail 2 and the Thames Tideway (the super sewer), were already well underway. Armitt suggests that the decision to start in London and head north is down to a lack of imagination in Whitehall. ‘The project is controlled by government in the South like anything else. It needed a bit more lateral thinking and pressure.’ So why not start it at both ends? ‘There would be a cash flow reason,’ Armitt says. ‘You’re spending at twice the rate. The Treasury wouldn’t allow that. They would say why are you spending £4 billion a year when we budgeted for £2 billion?’ Armitt suggests one way of garnering political support might be to first get to Birmingham and then build south from Manchester and Leeds. Opposition to big infrastructure arrives by many routes. Among the objections I most hear are questions as to why government money is being spent on what some see as vanity projects when simple and cheaper solutions, such as upgrading commuter rail lines in the North, could be adopted. Similarly, opponents of a new runway at Heathrow argue that Gatwick might be a better option. These are essentially ‘Little England’ concerns. It should not be a case of either or, but both. In early 2020, the newly elected government of Boris Johnson sought to demonstrate that it was determined to find ways of improving northern rail services in a way that did not divert resources from inspiring projects such as HS2. One should be under no illusion that if HS2 were to be dumped, the cash would not be reassigned to local projects. Government funding does not work like that. But there is a determination in Whitehall to force rail franchises to shape up. Several private sector operators have failed to live up to their franchise promises. They have struggled with new, more intense timetables and there have been ongoing labour 272

INFRA STRUC TURE disputes with the unions about staffing on modern rolling stock and the necessity of maintaining the number of guards, seen by many as an important safety and security issue. There have also been questions about whether Network Rail – which runs the rails, signalling and tracks – is capable of meeting its obligations in terms of rolling out better infrastructure. Theresa May’s weak government (2016– 19), distracted by Britain’s negotiations to leave the EU, found it difficult to come to longer term decisions on local infrastructure. Early in 2020, the Secretary of State for Transport, Grant Shapps, stripped Northern Rail of its franchise after years of poor performance. The performance of the service, operated by Arriva, was, he argued, ‘completely unacceptable’ after a year of chaos and cancellations across the network. The service ran from Newcastle to Leeds, Liverpool, Hull, Manchester and Stoke.21 The intervention was seen as a sign that the government was prepared to address failings in local transport that were hampering economic progress. Whitehall did not need to tear up visionary projects such as HS2 to make room for a fundamental shake-up of northern connectivity and commuter services. Expanding the UK’s airport capacity is critical for a country with global ambitions to enhance future prosperity. Heathrow is admittedly a difficult issue. It is a huge airport in the wrong place with planes flying over London emitting noise and toxic pollutions. That, essentially, is the case for starting all over again at the Thames Estuary. The reality is that Heathrow and the much smaller London City Airport are critical to London’s role as an entrepot. Along with the English language, the time zone and its heritage of financial markets, airport capacity will be a critical part of its future. London already lags behind the much smaller German financial capital of Frankfurt, which has four runways, Amsterdam’s Schiphol with six and Charles de Gaulle in France with four. It took more than a decade to get the proposals for a third runway off the drawing board, through most of the environmental testing and into the end zone, only to find the Court of Appeal erecting new 273

THE GREAT BRITISH REB OOT obstacles following receipt of applications for judicial review masterminded by green groups. Climate change may slow the pace of expansion as regards air travel, but big changes in aircraft technology are already making large savings on fossil fuels. Boeing’s Dreamliner series ushered in a new age of lighter aircraft constructed from carbon fibre that use less fuel. Research is under way to create hybrid planes that will recycle emissions for propulsion and use battery power. Rolls-Royce is developing battery-powered engines for use in planes on short routes and they will soon be in a position to supply electric power units suitable for helicopters and smaller island-hopping planes. With large amounts of R&D support, essential for the economy post-Brexit, engineering will resolve some of the current issues that surround problems associated with the UK’s carbon footprint. Taking Heathrow off the table now – as Britain starts a new phase in its economic and financial development – could crush our potential. It is easy to forget that Britain’s global leadership in insurance, foreign exchanges, stock trading and other financial activities stems from its maritime history and its ports. Sea ports still have a huge role to play. We need look no further than the contribution made by the fully computerised container port at Felixstowe and the Thames Gateway, which has been up and running for a number of years. Among the government’s firm proposals for bolstering Britain’s global outlook is the creation of ten free ports around the country, with the right to import and re-export goods outside normal tax and customs rules. The Chancellor, Rishi Sunak, who took over from Sajid Javid in February 2020, is an enthusiastic backer of the free port concept. Writing in 2016, Sunak enthusiastically backed the idea, arguing that as engines of economic growth free ports would reconnect Britain with its ‘proud maritime history’ and act as a ‘beacon of British values’.22 The historian Quinn Slobodian23 argues that ‘free ports as envisaged by Sunak resemble the foreign trade zones that have existed in the US since the 1930s, where goods aren’t subject 274

INFRA STRUC TURE to tariffs until (and if) they cross over into the domestic market.’ He suggests the arrangement could be of limited value in Britain because the tariff structure is different. However, Britain’s tariff structure outside the EU is a ‘known unknown’. Starting with a clean slate, there is no reason why an outward looking Britain, with its maritime past and looking outwards from Europe to beyond, should not be able to take advantage of a concept in line with the best traditions of a low tax, free enterprise state. It is too easy to forget that much of Britain’s leadership in financial services was built around its port developments, dating back to the Cinque Ports of the twelfth century. The opening of our ports to trade brought with it the need for early forms of insurance to protect consigned goods. The translation of values from gold- and silver-based currencies into sterling required foreign exchange ledgers and calculations, which developed into the first foreign exchange markets. Empowered and redeveloped free ports would be part of the golden chain that links the UK to its history. Among the great regrets is how the UK, a world leader in creating ports beyond these shores, sacrificed its control in the early 2000s through a series of foreign takeovers. P&O ports, with an unparalleled international structure of container ports worldwide, including the Eastern Seaboard of the United States, was sold to Dubai Ports World in March 2006 for £5.2 billion.24 A few months later, Associated British Ports, which handled a quarter of the UK’s seaborne trade from twenty-one domestic facilities, was sold to overseas interests in a deal valued at £2.4 billion.25 The sales of the UK ports infrastructure at home and overseas came during a period of acute financial transformation of the global economy in the period running up to the banking crisis of 2007–09. The Labour government of the first decade of the twenty-first century saw no need to interfere in the free market, even when vital parts of the UK infrastructure were at stake. Deals, such as the takeover of P&O ports and Associated British Ports, which ceded vital infrastructure to overseas buyers, were 275

THE GREAT BRITISH REB OOT plainly against the broader public interest. As Britain strikes out on its own post-Brexit, the loss of a domestically owned ports infrastructure, which could be utilised to expand global trade, will be immeasurable. Britain’s approach is in sharp contrast to that of the US and China. The United States Congress intervened to prevent P&O’s Eastern Seaboard ports, including New York, from falling into the hands of Dubai. Fearing security risks, the US insisted on local ownership. As the UK discarded its global network of ports, the Chinese have been building an alternative structure, stretching from East Africa to Sri Lanka. The Chinese shipping firm Cosco took the opportunity to take control of Europe’s seventh largest port, Piraeus in Greece, when the Greek government needed to offload assets during its financial crisis. The rediscovery of ports by the Tory party and Whitehall is a worthy cause, but it has come too late to rescue the global leadership and the window on the world that trade once enjoyed by a powerful UK with enterprises such as P&O. While the value of ports may have been neglected at home, it is well recognised by overseas investors. Britain’s sophisticated, computerised container port at Felixstowe provides a model for future development. Owned by Hutchison Port Holdings, the vehicle of Hong Kong’s richest man, Li Ka-Shing, it provides a shining example of how goods can be moved through automated hi-tech ports. It shows that with the right kind of investment in technological infrastructure the fears of long delays at Dover and at Irish border crossings can be avoided. Re-engineering the UK’s ports and improving adjacent road and rail infrastructure will enable the UK to recapture part of its global past. There is recognition by the IMF and British politicians that the era of low interest rates offers an opportunity for transformational capital investment by the government. There is no shortage of plans for a visionary government to buy into beyond the much debated existing plans. The National Infrastructure Commission has a grand title, a star-studded membership and has come up with a core series of proposals for the government to adopt, but attention 276

INFRA STRUC TURE and progress has been stunted, even though it has adopted the very kind of imaginative thinking that has been missing from the postBrexit narrative. The Commission came up with seven major recommendations to fix the UK’s economic infrastructure. These include a target for nationwide full fibre broadband by 2033, a date that looks preposterous and too far away given the speed of digital advances in the UK and overseas. The Commission also wants to see half the UK’s power provided by renewable energy by 2030. Meanwhile, Armitt has a vision for the UK and the Johnson administration, which is about going green and becoming energy self-sufficient, which doesn’t involve fracking: I would be driving very hard to resolve our energy strategy. That would include development work on carbon strategy, the potential use of hydrogen as a replacement for natural gas, offshore wind and encouraging solar. We have our equivalent of putting a man on the moon with zero carbon by 2050.

Hydrogen as a fuel has a long history. The first hydrogen car was developed by General Motors in the US in 1966, but ended up in a museum.26 On a trip to Tokyo in 2015, I visited a Toyota manufacturing facility that was showcasing fuel cell driven hydrogen cars. Several thousand of these cars were already on the roads of Japan’s capital, having been encouraged by generous tax incentives. Most current hydrogen supplies are a by-product of fossil fuel refining and have a heavy carbon footprint. The Hydrogen Council, which speaks for the industry, is ambitious and estimates that by 2050 almost one-fifth of power consumed globally could be hydrogen, thereby avoiding some 6 billion tonnes of greenhouse emissions – equivalent to the annual emissions of the United States.27 Hydrogen, if embraced by the UK, may well be the fuel of the future. The electrification of the railways, in particular the existing TransPennine route, has also been mentioned as part of the green 277

THE GREAT BRITISH REB OOT agenda, but John Armitt believes this train (electrification) has already left the station. ‘You can build on the concept of the next fleet of trains not having to be electric, but hydrogen,’28 he suggests. An engineer and a product of Portsmouth College of Technology, Armitt should know what he is talking about. He has variously held almost every job in UK construction and infrastructure, from being chairman of John Laing International to Network Rail to chairman of the Olympic Delivery Authority. Armitt is encouraged by the possibility of hydrogen being considered for some railways that are to be updated. He notes that Peterbrook, which owns rolling stock and leases it to train operating companies, is working with Birmingham University on a new generation of hydrogenpowered trains, which are already being trialled. At the core of what the Commission proposes for future renewable power generation are free market solutions embracing contracts for difference29 and the capacity market. It argued that priority should be given to insulating buildings, which was a feature of the Labour Party’s 2019 election plans. Labour pledged to create 450,000 jobs by installing energy-saving measures, such as loft insulation and double glazing, and renewable and low-carbon technologies in most of the UK’s 27 million homes. The plan, which was to be paid for through the public purse, was costed at £250 billion. Technology transformation will clearly be required if green goals are to be achieved. The safety case for the use of hydrogen in homes should also be properly tested, alongside carbon capture and storage. What has altered is the public’s recognition of climate change. The profile of this cause has been raised by several factors. The Swedish schoolgirl Greta Thunberg helped to elevate climate change to the top of the global agenda among young people. Policymakers at the IMF and the World Bank have been converted to the idea that investment in climate change is a priority for fiscal policy. In 2015, as governor of the Bank of England, Mark Carney was among the first central bankers to see climate change as a test for financial stability and urged financial institutions to take steps 278

INFRA STRUC TURE to insulate themselves from the impact. Meanwhile, on the streets of Britain and other countries around the world, the disruptive activities of Extinction Rebellion may have caused annoyance to commuters and people going to work, but it has drawn unprecedented attention to the desire for change and has raised public awareness to levels not previously seen. Britain’s motorists have been through the wringer over the last two decades. Years of poor advice to buy diesel engined vehicles was followed by a ban on diesel cars in low emission neighbourhoods, such as in London’s congestion charging area in 2019. The switch back to petrol, together with new exacting emissions standards across the EU (in the wake of Volkswagen cheating scandal), has led to huge disillusionment among consumers. Electric and hybrid powered vehicles are seen as too risky for many motorists because of their poor range and a lack of fast-charging points. Nevertheless, by the end of 2019 there were 255,000 electric cars and vans on Britain’s roads; 5.8 per cent of these vehicles were hybrids (plug-in hybrid electric vehicles – PHEVs) and 3 per cent were pure EVs.30 The Infrastructure Commission advocates a network of fast and rapid charging points across the country which, it believes, will provide reassurance to motorists who want to be greener. The obstacles are formidable. The operators of the UK’s network of motorway service stations argue that the electricity network is ‘not fit for purpose’31 to facilitate the roll out of electric charging points to accommodate the switch to hybrids and EVs. Peter Turl, chairman of operator Roadchef, told the FT that his company’s efforts to add charging services have been held up by distribution network operators who own the local grids and charge for installing new power lines. Delays can be up to three years. The government estimates that 214,000 public chargers will be necessary to support the net zero goal for emissions. At the end of 2019 there were just 29,019. The bigger concern is whether a grid based on renewables such as wind power can ever be reliable enough to keep the lights on, the cars running and the wheels of commerce turning. It is going 279

THE GREAT BRITISH REB OOT to require a heavy focus on investment in new power generation if ambitious zero carbon emissions goals are to be met by 2050. There is real scepticism among power experts as to whether a national conversion to EV cars, dependent on the rare metals for fuel cell storage, can really drive the carbon-free revolution. Over time, one would expect big oil – as it makes the transition from petrol and diesel to electric – to equip its downstream forecourts with electric charging points. That will become a point of competitive advantage, as it is for shopping centres and supermarkets in California – the spiritual home of Tesla. Over time, the biggest economic gains for the UK will be the use of the nation’s science, research and engineering base to embrace new technologies for motoring. Research on these green motoring and power technologies will be stepped up. There was big disappointment in November 2019 when electric power pioneer Tesla decided to build its first European production plant in Berlin – Brexit was seen as a big factor at the time, but the UK has a huge opportunity to be a big player in green technologies if it gets behind research already being done. GKN (which has been controlled by the industrial conglomerate Melrose since 2018) is a pioneer in the development of e-Drive, the electric car equivalent of the powertrain, but its position is fragile. The case for significantly ramping up investment in green motor technologies was made by the IMF in its World Economic Outlook report. It cautioned that transformation will be disruptive to the motor industry as it is currently constituted: A significant ramp up of investment in the production of electric and other alternative fuel vehicles is expected in the medium term, particularly in Europe. However, the supply chains for electric vehicles are several orders of magnitude shorter than those for fuel powered vehicles. Furthermore, entry level prices remain higher than for fuel powered cars, which could limit demand uptake. Accordingly, automakers are facing challenges that mean they will have to make changes to 280

INFRA STRUC TURE business models above and beyond those required by technological reconfiguration.32

To encourage this green transition, the government would be best advised to refit tax incentives for R&D by widening the reach and scope of the ‘Patent Box’, which was largely developed for pharmaceutical companies. Climate change offers not just a chance to clean up the environment, but an opportunity to place the UK at the forefront of enabling technologies such as longer-lasting rechargeable batteries and fuel cells. Britain has the proven technology, but has been far too timid in backing ideas. The UK’s need to upscale its ambitions is illustrated by RollsRoyce’s efforts to become a big player in next generation power. In July 2019, the UK government, after long delays, signed off on £18 million of R&D support funds for the group’s concept of small modular nuclear reactors, using techniques pioneered in nuclear powered ships and submarines, to provide land-based power generation on a flexible basis where needed. This kept the dream alive rather than drove it ahead with some urgency. By way of contrast, at the same time, Rolls-Royce’s German subsidiary was awarded £500 million to invest in a hybrid power project by a state government. Tinkering around the edges, as the UK government has been doing, is never going to be sufficient. Evidence suggests climate change is devastating communities. The ferocity of the hurricane season in the Caribbean and in Central and North America has caused utter desolation, from comparatively poor Puerto Rico to the fashionable playground of the superrich at St Barts. Typhoon Hagibis took lives, destroyed communities and interrupted the rugby World Cup in October 2019. During 2019 and 2020, forest fires raged ever closer to urban centres, from California to New South Wales and Queensland, destroying lives and communities along the way. Flooding, hitherto a once in a few decades event in the UK, has almost become the norm. The case for using public funds to bolster 281

THE GREAT BRITISH REB OOT flood defences and combating misery for tens of thousands of people each year is overwhelming. Private sector builders and local authority planning departments – the nation’s overworked busybodies – could play their part by ending the collective farce of building on flood plains. The National Infrastructure Assessment for the UK33 found that as many as 5 million properties in the UK are currently at risk of flooding. Indeed, the public was uncomfortably reminded of this reality in the early days of the 2019 general election. Party leaders made haste to Doncaster and the surrounding Yorkshire communities as the River Don came close to breaking its banks after weeks, if not months, of torrential autumn rain. Great swathes of the country found themselves under water in the early months of 2020 after a relentless series of storms coming in from across the Atlantic. Immediate investment needs to take place to ensure that the areas most in danger of flooding get the protection they need. Thinking long term, the government needs to seize the moment and adopt the National Infrastructure Commission’s plans for a nationwide standard of resilience to flooding. These should include traditional defences, green infrastructure and individual measures to make vulnerable properties less likely to be inundated. Existing Environment Agency plans need to be fulfilled, updated and implemented with urgency. ‘The way the Government finances work makes it difficult to underwrite or guarantee projects. As soon as the Government says they are going to underwrite something, someone says it is a contingent liability and it goes on the books.’ There are more creative ways of financing infrastructure, as has been seen with the super sewer. Thames Water have been allowed to define the project as a regulated asset, placing a value on what is being built and offering a return on investment during construction. The approach has proved highly controversial and was weaponised by Labour in both the 2017 and 2019 elections when it proposed to take water into public ownership. In 2019, the defeated Labour leader Jeremy Corbyn and his team argued it was wrong 282

INFRA STRUC TURE that consumers along the tideway were paying extra to fund dividends that flow overseas to owners such as sovereign wealth funds. Nevertheless, if the government wants to be bold, Armitt thinks it is a model that could work, especially for assets that are owned by UK financial institutions such as pension funds. In my conversations with EDF, they indicated that this would be the preferred financial structure for building a ‘second Hinkley’ to replace the existing Sizewell nuclear facilities. The decade of austerity after the financial crisis of 2008 to 2009 saw government spending under lock and key. Restoring stability to the UK’s ragged public finances, swelled by bank bailouts, the welfare costs of recession and the slowdown and loss of tax receipts, was the priority. Some infrastructure survived the cutbacks, including Crossrail, but much was sacrificed. All the evidence from Japan’s superfast railways to China’s industrial revolution shows how infrastructure investment can power up growth, but the UK Treasury is historically timid about backing big infrastructure and taking risks with the national balance sheet. Only when dire circumstances require it, as at the peak of the Covid-19 economic lockdown in 2020, does the Treasury come to the rescue. The combination of low interest rates, low productivity and the need to put down the foundations for a post-Brexit future must overcome previous timidity. The government should get behind new green technologies with big R&D funding, as well as solid projects such as bridges, highways, the information super-highway, railways, ports and runways. Also, the private sector needs to come in with logistical and financial support. Levelling up the weaker regions in the North with the more prosperous South East must be part of that. Cancelling big projects and lowering the UK’s sights cannot be an option. If anything the imperative for stepping up is reinforced by the economic consequences of Covid-19, the scarring of business and the rise in unemployment. As was the case in the Depression-era United States of the 1930s, finding shovel-ready projects and public works will be among the keys to recovery. 283

THE GREAT BRITISH REB OOT The 2019 election moved the goalposts on infrastructure, with two of the big three H’s, Hinkley and HS2, proceeding and the third, Heathrow, being kicked into the long grass by the courts. Delivering big projects has long been a problem for the UK, but the country is not without its merits. Admiration for British integrity, largely corruption-free commerce and the universality of the English language are huge assets. The UK also has great traditions of global trade dating back to Empire. The quality and durability of many of its heritage values and brands should be of terrific advantage, as we will see in the next chapter, as the UK embarks on its global adventure.




It was the nation and the race dwelling all around the globe that had the lion’s heart. I had the luck to be called upon to give the roar. Winston Churchill, 30 November 1954 Economic and political shocks if properly embraced can be enormously energising. Brexit is such an event, as is the profound impact on British and global trade and production associated with the coronavirus pandemic. The UK is no stranger to such benchmarks in our economic history such as the sterling devaluation in the 1967 and the exit from the Exchange Rate Mechanism (ERM) in 1992. Such traumas provided an opportunity for the country to shake itself out of its stupor and put the grubby differences of the recent past behind us. In looking to the future now that the UK has left the EU, it should not forget its history and heritage. While it has become fashionable to disparage the empire – and there is much to be deeply ashamed of, from the slave trade to the opium wars – there is also a narrative of civilisation, good governance and great commercial values that are still helping to lift developing countries and emerging markets into the OECD club of developed nations. Preserving and taking advantage of the honourable aspect of heritage, while seeking to heal the terrible wrongs of the past, has to be part of the programme for rehabilitating the UK and its values. As the son of a refugee from the Holocaust whose father loved and venerated Britain, I find it hard to understand why the nation often seems to have such low self-esteem. As the UK embarks on 285

THE GREAT BRITISH REB OOT a post-Brexit renewal, it has become fashionable to deprecate Englishness and the admittedly nebulous concept of ‘Global Britain’, but I passionately believe that there is still huge value in the UK. The nation’s rich heritage at home and overseas is something to be admired and developed, and should not dismissed as a vacuous slogan. My father’s name was Michael. His appreciation of Britain and its tolerance dated back to the civilised welcome he received when he arrived in Britain from embattled Europe at the start of the Second World War, but it went deeper than that. It was visceral esteem for the way of life and a broader culture. For instance, he was never happier than when he enjoyed the camaraderie of the racecourse, studied the trainers and jockeys and involved himself in a sport that was a great social leveller. Indeed, family legend has it that his brother-in-law was dispatched to the Brighton races, high on chalk cliffs above Kemp Town, to summon him to the maternity hospital on the day of my birth. Above the desk where I am writing, I have a black and white photograph of him from the late 1940s, just a decade after he arrived in Britain. Having come to Britain penniless, remarkably he built enough capital to acquire a small farm on the South Downs and had already adopted the attire of his new land. He is dressed in a tweed jacket over a Fair Isle ‘V’ necked pullover and cord trousers with a jaunty trilby on his head. It is a picture of quintessential British attire. A decade or so later he bought his favourite winter coat, a heavy, woollen number made by Crombie. On its 2020 website, it describes its classic coat as ‘evoking tradition and tireless British elegance’, adding that ‘devotees included Sir Winston Churchill, the Beatles and Cary Grant’. The coat outlasted my father, in almost immaculate condition, even though he lived to be 103 years old. As a stranger in a new land, my father felt comfortable with traditional British ways of dressing and valued tailoring. He instinctively knew that not only was quality of the coat unsurpassed, there was a broader national interest in buying British. More is the pity that over recent decades, in the name of free market capitalism, so 286

HERITAGE many valuable enterprises that were intrinsically British have been allowed to wither, or been sold overseas. My family’s history makes me think there is something very special about the UK and the nations that make up the Union, which have continued to make an indelible mark on the world. Its long history of providing a home for refugees and migrants has made a real contribution to culture, science and the arts, and economic prosperity. Curries, kebabs, bagels and pizzas have become as much a part of our diverse street life as fish and chips. It is one of my personal regrets that there has been too little recognition of the part immigration has played in the advancement of the UK economy. In fact, the latest long-term projections from City forecasters CEBR cite migration as one of the reasons why the UK economy will outpace that of France and other EU members in the 2020s.1 The December 2019 election result demonstrated that the British people, including those in Scotland who supported the nationalists, recognised there was something out of character about Jeremy Corbyn’s Labour Party. Ordinary citizens all over the country (with the notable exception of London) rejected the far-reaching public ownership agenda2 and the anti-Semitism of the Labour Party, both of which ran contrary to British values. The UK has a cultural, commercial and social coherence to be treasured, which should not be ‘blasted out of the water’. There also is a fashionable view that Britain as a nation is a construct. In his book Island Stories,3 Cambridge historian David Reynolds argues that ‘although England’s empire building made the Union, it never created a unitary UK state or fostered a strong and coherent sense of British identity’. That may be true constitutionally – one need only look to the political chaos of 2016–19 which highlighted the fault lines and the ‘builder’s finish’ of devolution. Focusing just on the ever-moving political settlement misses the point. There are unifying characteristics of Britishness that transcend politics. Tolerance and fairness are part of the national psyche. They are the reason why extremist parties in the UK have 287

THE GREAT BRITISH REB OOT never enjoyed the electoral success of their counterparts on the Continent. Occasionally they manage to seize the headlines as in June 2020 when the far right ostensibly came together to defend the Churchill statue in Parliament Square.4 It was allegedly a response to largely peaceful Black Lives Matter protests after the killing of George Floyd in the US city of Minneapolis. But the racist violence and personal vandalism that accompanied their involvement was a reminder of what a disgraceful rump – far from the mainstream – such thuggish demonstrators have become. Their values are divorced from the UK’s great unifying institutions – the defence forces, the Royal Family and the NHS – which are respected or at least grudgingly accepted in most parts of the country. Never was the NHS more venerated than during the Covid-19 pandemic of 2020. The military quietly and unobtrusively played key roles in ramping up logistics for PPE and testing and constructing the Nightingale emergency hospitals. There is also admiration for the quality and heritage of what the UK does, whether it is distilling single malt whisky in Scotland, manufacturing specialist steels in Port Talbot in Wales, making Marmite in Burton-upon-Trent in Staffordshire or weaving fine linen in Northern Ireland. However, there is some concern that by leaving the EU the UK will fracture because the Union is so fragile. The other nations of the Union, Scotland, Northern Ireland and Wales, with their ‘remain’ majorities, will strike out against English dominance, forge new relationships or go it alone. The UK opted for a different political and economic path when it joined the EEC in 1973. Now that Britain is to leave, it is only too easy for those who supported remain to see advocates of Global Britain as engaging in a Victorian fantasy of empire. What is really remarkable, given the fractious decades since the Second World War and the end of empire, is that shared values and histories are still so potent. When the chips were down in the wake of the 2008–09 financial crisis, it was to the Anglosphere that Britain looked to for people to repair the system. 288

HERITAGE Canadian Mark Carney was drafted in as Governor of the Bank of England, directly from the Bank of Canada, to make the City safe again. New Zealander Ross McEwan was tapped as the person to turn around the Royal Bank of Scotland. When English rugby needed urgent attention after its failure in the 2016 Rugby World Cup, it turned to an Australian, Eddie Jones, and so on. There is a trust in the values of the Anglosphere which (with the notable exception of Premier League football with its overseas managers and star players) has never been fully replicated in Europe, in spite of nearly five decades under the Brussels umbrella. It is not just with Canada, Australia and New Zealand that there are strong bonds. At a 2019 lunch with a top banker from Kenya, he expressed frustration that the UK, as it prepared to leave the EU, was not making a bigger effort to reach out to Africa where British values, commerce and integrity are still highly valued. In the boardrooms of Britain’s biggest companies, émigrés from the subcontinent have made a huge contribution. Entrepreneurs from India, notably Tata, have bought into some of our most emblematic brands, such as Jaguar Land Rover. Yet, moving in the other direction, British penetration into India, one of the fastest growing markets in the world, has been pallid. This is an obvious missed opportunity. Very British brands such as the malt-flavoured drink Horlicks (sold by GlaxoSmithKline to Unilever for $3.8 billion in December 2018) have enormous traction in India. This commercial advantage has never been fully exploited. Elsewhere, Britain has a shared history with China through Hong Kong, where there were serious tensions in 2019–20. However, with notable exceptions such as the luxury fashion group Burberry and life sciences group AstraZeneca penetration of the Chinese mainland lags behind that of our competitors. The advantages that Britain enjoys are often underestimated. The twenty-first century tendency is to deprecate the colonialist past. Among ‘woke’ segments of the population, those who pride themselves on being alert to racial or social discrimination and 289

THE GREAT BRITISH REB OOT injustice, there is a desire to tear down monuments to what is seen as a tawdry history. The nation’s historic universities have been under pressure to look into their past. In 2019, Cambridge University announced it would explore the archives to ascertain how the university may have benefited from slavery.5 In 2020, after George Floyd’s death in the US, cities and commercial enterprises across the UK felt obliged to re-examine the role Victorian entrepreneurs and philanthropists played in the slave trade. As the Churchill quote above illustrates, the UK’s wartime Prime Minister observed in the Commons, on his eightieth birthday, that the beating heart of Britain is shared with kith and kin and their descendants across the world. Among the world’s oldest and most deeply felt sports rivalries is that between the England cricket team (representing the whole of the UK) and its Australian counterparts. These passions are strong and deeply felt, yet almost everyone in the UK has family or friends down under and feels a close connection. The UK, especially London, is as big a magnet for young Aussies as it has ever been. The one big regret is that the UK’s pre-Brexit commitment to free movement of people across the borders of the twenty-eight EU members meant that talented Australians and other citizens from the Commonwealth have lacked the same access. The horror and sympathy resulting from the bush and forest fires that ravaged Australia in late 2019 and early 2020 could not have been greater were it ancient woodlands in England that were under threat. The links, affection, sacrifice, affiliation, and love of democracy and freedom – as observed by Britain’s wartime Prime Minister – though strained at times, remain intact. The UK does not come to its new global role without weapons. The strength of the nation’s great research universities, its leadership in technology, pharmaceuticals, the creative industries and finance have been described in earlier chapters. These core economic strengths are supported by overarching, but less visible cultural strengths. The much talked about bulldog spirit, really another 290

HERITAGE name for resourcefulness, is not a myth. One only has to visit an A&E department in a major hospital to learn how an underfunded and strained NHS more than copes under sometimes harrowing circumstances. There is a collective determination to do the best for its patients, even if it is sometimes not good enough. Ownership of the English language (or a version of it) is much undervalued. There is a tendency in Britain to lacerate ourselves for our lack of foreign language skills. One of the reasons why British people have been able to get away with this is because, for most nations around the world, English is the de facto, if not official, second language. It is somewhat disconcerting when Englishspeaking presenters on Swedish, Danish and German broadcasts are easier to understand than some of our natives. The universal quality of English, perpetuated by the Silicon Valley giants with billions of members and users, has made English the lingua franca in an online digital world that knows no boundaries. That makes Britain a great place to write software for the world, to do science and write scholarly papers, and for creative output from Star Wars movies to the Tottenham sound of Stormzy. The commercial advantage of this bit of heritage, especially when looking to fastgrowing parts of the world such as the subcontinent and the Pacific, is immeasurable. The UK gets a free ride on the world wide web. It is easily forgotten and dismissed as flummery, but Britain’s hierarchical society with the Royal Family at the top is a brilliant promotion. There are occasional lapses, and big ones at that, the scandal surrounding the Queen’s second son, Prince Andrew Duke of York, being a case in point. In late 2019, he was all but expelled from ‘the firm’ because of a close relationship with the convicted and now late sex offender Jeffrey Epstein. Similarly, the decision of the Duke and Duchess of Sussex, Prince Harry and Meghan, to remove themselves from royal duties and retreat to Canada in December 2019 with their young son Archie, and then move on to Los Angeles in March 2020, was a sharp break from the past. Nevertheless, the blanket media coverage of the events surrounding 291

THE GREAT BRITISH REB OOT their departure from the UK, and the divided public debate surrounding the decision, was a mark of the esteem with which the monarchy is held. Overall, the Royals are a great plus. Even if Scotland were to achieve independence, it is clear there is no obvious desire to collapse this particular part of the Union. As well as offering a carapace for the whole of the UK, the grandeur of British royalty sells brilliantly. They are great ambassadors for the Anglosphere and, so far, have been successful in holding at bay the strains of republicanism in Australia and, to a lesser extent, New Zealand. The affection, interest and respect the Royals command in the United States, which cast them out nearly 250 years ago, is a demonstration of the value of the brand. It is no surprise that the Netflix TV series The Crown, first shown in 2016 and into its third season in 2019, has been a roaring success. It has been the battering ram that has helped the upstart entertainment streaming giant Netflix take on long-established media behemoths such as Disney in their own territory. In much the same way as ‘brand Queen’ has opened up all manner of commercial opportunities in the Gulf region, it could equally be deployed in new, fast-growing Pacific markets. If this bit of heritage is to be developed globally for the UK’s broader benefit, tarnish must be avoided. One of the oddities of the UK’s post-EU settlement is the strength of London as a global city. That is why, among other reasons, it has reason to be optimistic about the future and its ability to prosper away from its European neighbours. France is rightly proud of the elegance of Paris, while Germany has embraced the best in architecture (much of it, incidentally, British) in transforming Berlin into a coherent, cultural, tech and government hub. Rome and Milan are triumphs of history, culture, good taste and high fashion. But, in terms of sheer size, economic influence, global reach and growth none of them can make the same claims as London. The UK capital’s population of 9.1 million puts it well ahead of its nearest competitor in the EU, Berlin with 3.7 million. 292

HERITAGE London is also the most ‘Remain’ part of the UK. Its prosperity, elitism and cosmopolitanism means that many of its residents, especially the young, think differently about Europe. Easy access for jobs and vacations and the freedom of movement that comes with being European trump much else. A decade of slow growth, high unemployment and the rise of right-wing populist parties do not appear to enter the debate. In the 2016 referendum, London voted solidly 60:40 to remain part of the EU. In the 2019 general election the Labour and the Liberal Democrat parties dominated in spite of London’s relative prosperity. There was distrust about the impact of change to a fast-growing multicultural city and distaste for former London mayor, Boris Johnson, with his mercurial approach to politics. The pre-eminence of the City of London and Canary Wharf in finance is a given. There are concerns that there will be a slow erosion of its financial clout should its rules and regulations diverge too far from those of Brussels and Frankfurt. However, those who believe that the City’s edge is endangered underestimate its capacity down the ages to remake itself. Britain’s Anglo-Saxon principles, based on a trading culture, contrast starkly with Europe’s hidebound, risk-averse, rules-based approach to finance that stifles risk and competition. London is much more than the financial capital of Europe. Thanks partly to the English language, it is also a cultural powerhouse. Prior to Covid the Theatres Trust reckoned that there are 263 theatres operating in London, which is about the same number as Tokyo, while New York tops the global list with 400. In 2018, London’s West End theatres had revenues of £765 million and drew audiences of 15.5 million people. Add to this the output from film studios in the London area and original productions from the BBC, ITV, Channel 4 and Sky and you have the highest concentration of creative output in Europe. The British capital wobbled a little in the period 2016–19 when a combination of Brexit uncertainty and tax changes hurt the domestic property market. That, however, did not damage its 293

THE GREAT BRITISH REB OOT relentless expansion. Once neglected areas of the city, from Battersea to the King’s Cross area, saw new towers sprouting like newly planted forests. In 2019, permission for more than 500 new skyscrapers were granted across the area. A new phase of development opened up at Canary Wharf. The City of London’s taste for exotic towers – the Diamond and the Tulip among the latest examples – show no sign of abating. There has been no cooling of enthusiasm from foreign buyers who want to acquire the city’s towers – new investors continue to arrive from Latin America and the Gulf. In his book A Short History of London,6 the author, Simon Jenkins, not a supporter of Brexit, argues that whatever happens at Westminster, London’s ‘global status looks secure, as does its cultural appeal as an educational and tourist destination’. It would, in his view, always be what it always has been, ‘Britain’s bridge to the Continent’. London’s scale and eminence, and its historical ability to retool itself in response to catastrophe and political change, could, if properly backed, be an enormous heritage advantage as Britain seeks to establish a new place in the world order. It will, however, need ever-improving infrastructure, including more runway capacity, if its hegemony as Western Europe’s biggest and most international metropolis is to be further developed. As Britain strikes out on its own, the rich variety of enterprises associated with the nation and the heritage of brands and intellectual property will all be of vital importance. As part of the EU, the UK has tended to outsource a large part of its development budget. Among the G7 advanced countries, Britain is the only country that fulfils its promise to devote 0.7 per cent of its GDP to overseas assistance. This policy has been maintained throughout a decade of prosperity, in spite of constant criticism from the political right and sections of the media who have argued that the money was not being spent wisely. Some critics felt that the cash might be better aimed at food banks and the homeless in the UK rather than in far off lands. 294

HERITAGE What is certain is that the pot of £14 billion7 plus for overseas development aid spent each year, rising with the size of the economy, could be allocated differently. As the biggest donor to the World Bank’s concessional window, the International Development Association, the UK commands a big say in how money provided to the poorest countries around the globe is spent, but a case can be made that the funds have not been deployed to best effect for Britain’s diplomatic and commercial interests. This is partly because there has been little consistency in policy direction, with Secretaries of State coming and going with great rapidity in spite of the large amounts of taxpayer funds at stake. As Secretary of State from 2012 to 2016, former Tory MP Justine Greening made a valiant effort to involve UK commercial and educational expertise in development projects by tapping into the big audit firms, the London Business School and other institutions. She recognised that there was a real opportunity for UK plc to benefit in diplomatic, humanitarian and commercial terms from spending the overseas aid budget more wisely. That is a post-Brexit opportunity. When existing obligations to the EU have run their course, the UK can focus – as France and China does – on using overseas aid to support commercial ambitions in frontier markets and countries. In the midst of pandemic in June 2020 Boris Johnson announced, under the rubric of ‘Global Britain’, that he would reunite the Department for International Development with the Foreign and Commonwealth Office (FCO).8 It was a controversial move which drew the ire of three former prime ministers, Tony Blair, Gordon Brown and a Tory predecessor David Cameron. The goal of the Johnson government was to provide a measure of coherence to overseas assistance as Britain set its new international role. Similarly, the FCO has long recognised that selling Britain overseas is a critical part of the role of our embassies and high commissions around the world. The truth is that people do not generally join the foreign office because they fancy a commercial role nor, in the final analysis, do they opt for this. However, the idea that by 295

THE GREAT BRITISH REB OOT simply driving around in a Rolls-Royce, entertaining visiting businessmen and hosting the occasional trade show ambassadors are fulfilling an important business role is absurd. As the UK reaches out to the Pacific, it needs a new expert cadre of officials. The government needs to reach into the ‘Magic circle’ of City law firms, the big audit professional companies and their consulting arms, engineering consultants, the City and FTSE 100 firms to recruit people. Thus far, our services sector, from architecture to insurance, has prospered overseas with minimal assistance from our embassies. The expansion of the insurance group Prudential across the Asia–Pacific region is down to the vision of the company dating back to the 1990s when former chief executive, Mick Newmarch, identified China as a potential market. Intimate knowledge of business and how UK skills can be better deployed globally is critical, which companies can do themselves. Defence engineer Babcock has used its expertise to keep the British defence fleet, including our nuclear submarines, afloat and provides similar services for the Australian navy. The possibilities for moving into new markets – in particular, using the UK’s unique expertise in sectors ranging from aerospace to financial transactions – are endless. Traditional diplomats would struggle with the technicalities of complex derivative transactions and they would not know where to begin with ‘comparison’ sites which offer citizens easy choices they never had before, using a technology in which the UK is a pioneer. They simply do not have the expertise or the strategic imagination. One of the difficulties of Britain going global is that too often the national interest has been sacrificed on the grounds that Britain, particularly as it struggled with executing Brexit, wanted to show it was open for business. On 24 December 2019, just twelve days after Boris Johnson was elected with a big majority, now former Business Secretary Andrea Leadsom, signed off on the sale of British aerospace pioneer Cobham to America private equity firm Advent. Founded by First World War flying ace Sir Alan 296

HERITAGE Cobham, thought to be one of the models for Biggles in the famous Capt. W.E. Johns series of books, Cobham leads the world in in-flight refuelling technology. It was Cobham’s engineering that helped Britain succeed in shifting munitions and other supplies to the South Atlantic during the Falklands war of 1982. The sale to Advent went ahead against the advice of a heavily redacted national security report prepared by the Ministry of Defence. By consigning a famous company, its R&D and patents to the ownership of a US financial outfit with little expertise in the area, Leadsom and her advisers not only betrayed the future of important British intellectual property, they deprived the UK of profits from marketing valuable aerospace technology. Jobs and skills in Wimborne, Dorset may have been temporarily saved, but a heritage brand and its technology had been sacrificed. Contrast the fate of Cobham, where a compliant management sold out rather than buying into a vision of Britain’s capabilities, with that of global pharmaceutical giant AstraZeneca (AZ), discussed in an earlier chapter. When AZ was bid for in 2016 by US drugs giant Pfizer there was a similar view in Whitehall, where it was believed that showing the UK was open for business was more important than the underlying enterprise itself. It took a French chief executive, Pascal Soriot, to fight off the boarders. The loss of R&D and a drugs pipeline that has made the UK a leader in immunology treatments for cancer would have been catastrophic. AZ, long before Brexit, recognised the opportunities in the Chinese market and has since become the biggest and most successful overseas pharma company working there. There is no way that the US would have permitted the sale of a major pharma company under American ownership to a foreign power. It is a huge paradox that overseas buyers place much more value on heritage British brands than the UK. A brave fightback against overseas marauders by Lady Cobham, widow of former boss Sir Michael Cobham, was ignored in Whitehall and by the government, but she generated popular appeal. Similarly, almost a 297

THE GREAT BRITISH REB OOT decade earlier, Cadbury was sold off to American food conglomerate Kraft in spite of a public backlash and the intervention by some members of the Cadbury family. The attraction of Cadbury to its new owners was its repute in emerging markets, notably India, where the America buyers had little purchase. The value placed on emblematic British products is much greater overseas than at home. In January 2019 the Japanese drinks firm Asahi paid £250 million to buy craft brewer Fuller’s, which has been making beer, notably London Pride, at the Griffin Brewery at Chiswick, west London since 1654. Historically, Japan has been among the more benign owners of UK companies. As strategic investors with a positive view of the UK, Japanese firms invest for the longer term. The loss of control of valued heritage brands with the ability to spearhead expansion in overseas markets will, as was the case with Fuller’s, always cause anxiety. Citizens are more prepared to campaign to keep British brands they can identify with, such as Fuller’s and Cadbury. Some overseas owners, particularly in the car industry, have invested heavily in a way that British capitalism often discourages. BMW revived and rebuilt the Mini as a brand. Most buyers of Rolls-Royce cars will be barely aware that the ultimate owner of the world’s greatest car brand is BMW. The German mass car makers BMW and Volkswagen know that it is the Britishness as much as the stateliness of their vehicles that make them desirable in the newly rich Pacific economies. The public interest is too often sacrificed for short-term gains. I was reminded of this early in 2020. Imagination Technologies was one of Britain’s handful of high-tech champions that had made the transition from university laboratories to the FTSE 350 index of quoted shares. Imagination’s achievement was to build around the chips that powered screens for Apple’s mobile devices. In 2017, Apple managed to replicate Imagination’s chips in its own labs. The ruthless Silicon Valley giant then ended its contract with the British firm and Imagination shares plummeted by 70 per cent. This, in spite of the 298

HERITAGE embedded value of Imagination’s patents, engineering skills and proven ability to do the R&D and bring new products to market. At the first smell of cordite, the investment funds behind Imagination sold out to a Chinese-backed private equity vehicle Canyon Bridge, which had already been ostracised by the US authorities. In early 2020, it emerged that Imagination had repeated its original successes and developed a new generation of Graphic Processing Units for use in mobile devices. The new chips were seen by tech analysts as the biggest breakthrough in cell phone technology in fifteen years. Apple dashed back and signed a licencing agreement for the use of this new equipment, but the value will accrue to Chinese investors rather than those UK shareholders who were far too quick to abandon a firm they had once championed. The UK will need to get behind technology such as that developed by Imagination and the smart chips fabricated by Cambridge-based Arm Holdings (now part of Japans Softbank) if it is really to compete in the global market place. There is little doubt that the UK does have global giants that are capable of exploiting global markets. Unilever is a case in point. In February 2017, I was in the Cathay Pacific lounge at Hong Kong International Airport scanning my emails while waiting for a connection back to London after a trip to a family wedding in Australia. I was genuinely shocked to learn that Unilever was the subject of a $145 billion indicative bid from the South American controlled food giant Kraft Heinz, backed by no less a figure than the world’s most famous investor in brands, the Sage of Omaha, Warren Buffett. What immediately struck me about the offer was how damaging it would be to Britain’s post-Brexit future. Aside from all of the other reasons for opposing such a deal, Unilever, with its enormous portfolio of internationally recognised food and domestic hygiene brands, was among a handful of British companies already fit for purpose when the UK left the EU. Its Anglo-Dutch ownership meant it was safely anchored in the EU irrespective of future trade arrangements between London and 299

THE GREAT BRITISH REB OOT Brussels. Significantly, it generated 58 per cent of its sales in emerging markets, making it one of the few UK companies to have recognised and fully responded to the global challenges as the UK looked beyond its near neighbours on the Continent to the broader horizons that will become the focus of the future. Among the early surprises was the silence of Theresa May’s government and the political classes on the £112 billion offer for Unilever. One might have thought that a government of a Prime Minister who had declared herself sceptical about foreign takeovers on the steps of Downing Street when taking office in the summer of 2016 would be shouting foul from the rooftops at the prospect of such a bid. After all, the Anglo-Dutch giant has a history dating back to the nineteenth century on the Wirral and was in danger of being swallowed up by a financially driven behemoth with no interest in the ethical and green capitalism that lies at the core of Unilever’s business. If Unilever were to have surrendered its independence as Britain plotted a new global future outside the EU it would have been devastating. It is companies such as Unilever that are reaching into the fastest growing markets in the world, from Asia to Latin America, upon which the UK’s future prosperity relies. At the time, Unilever may only have employed 7,500 people in the UK, but its branding, marketing, and food and product safety is regarded as an exemplar to the world – its R&D and testing labs at Port Sunlight on Merseyside are much revered. Its overseas earnings are fed back into the UK’s balance of payments and our tax system, while paying out the dividends that finance the nation’s private sector pensions. In June 2020, after a lengthy review, Unilever chief executive Alan Jope announced that the board had decided to unify its Anglo-Dutch structure in London. Brexit had not proved an obstacle. Prime Minister Boris Johnson declared the move ‘clear vote of confidence in the UK’.9 Kraft Heinz, which bid for Unilever, is no longer the same company that bought Cadbury in 2010, but the word Kraft alone should have set off alarm bells in Whitehall, Westminster and among the competition authorities in the UK, as well as in the Netherlands 300

HERITAGE and Brussels. When Kraft bought Cadbury, it solemnly promised to respect the brand and keep open the Somerdale factory near Bristol where the ‘Wispa’ bar was manufactured. However, it moved production to Poland, reneged on its promises to preserve Cadbury’s spiritual home at Bourneville and shutdown the UK corporate headquarters. Cadbury’s tax domicile was shifted to Switzerland and HMRC revenues were shredded. When Kraft’s American chief executive Irene Rosenfeld (who now heads the Cadbury successor, Mondelez), was invited to testify before a Commons committee about broken pledges she declined to turn up. Corporate governance, ethical business practices and all that we hold dear in British capitalism are all unknown to the three Brazilian billionaires who control 3G Capital, the ultimate owners of Kraft Heinz. Moreover, 3G Capital was already heavily laden with debt from previous highly leveraged takeovers. Taking on tens of billions of more of debt would have led to an even more unstable financial structure and would have caused greater uncertainty about the future of many of Unilever’s symbolic brands. The motivations behind the Kraft Heinz approach were crystal clear. The owners were stuck with two legacy companies, one famous for inedible cheap cheese products, the other for fifty-seven ex-growth brands. Both were branded goods firms that were stuck in the past in an era when people looked for evolving nutritional and innovative products and branded and tested personal hygiene care. Unilever offered new brands – from Ben & Jerry’s ice cream to Dove personal care – and growing markets that would add lustre to the dead weight of the Brazilian group’s existing portfolio. Kraft Heinz could only consider such a bid because of the availability of cheap finance and the possibility of making big cuts in costs. In other words, to make the Unilever deal work it would have had to do what Kraft did to Cadbury. Find cheaper areas of production, destroy the corporate culture and betray the values of the enterprise. There was much about Unilever that could be criticised, including its impenetrable corporate bureaucracy and its attempt to 301

THE GREAT BRITISH REB OOT impose higher prices for Marmite on UK consumers after Brexit. The good fortune for the group was that in 2017 Kraft Heinz met an immoveable force in the shape of Unilever’s Dutch chief executive, Paul Polman. Whereas a more Anglo-Saxon board might have buckled, Polman, a vocal proponent of meeting the needs of climate challenge and global responsibility, stood firm against the marauders. He saw them off the field of battle. Shareholders were kept on side with his promises to self-reform by selling off tired and low-margin spread brands such as Flora and by imposing more exacting growth targets. It was a pity that, a year later, Unilever sought to boost its defences further by shifting its domicile and share quotation from London to Rotterdam. In October 2018, Unilever beat a humiliating retreat and Polman, who had honourably defended the group’s independence, its brands and culture against the marauders, prematurely stepped down from office having lost the trust of investors. Whereas Unilever proved robust enough to see off the marauders, this was just as well. In spite of all that has happened, UK governments have struggled with the whole issue of defining the national interest. The government of David Cameron and George Osborne aligned themselves with free market interests in the run-up to the Brexit referendum on the grounds that it was necessary to show that Britain was open for business. However, countervailing forces, including hearings at the Business Select Committee of the Commons, a media campaign led by my paper the Daily Mail, a robust board and the determination of some long-term shareholders, defeated the Pfizer bid for AZ. Theresa May’s government pledged a different, more interventionist approach and it appeared that a meaningful national interest test would be imposed by ministers. However, Mrs May’s government had little opportunity to address the issue and became bogged down and eventually imploded on its failure to steer a Brexit deal through the Commons. The Boris Johnson government also fell at its first hurdle when it waived through the Cobham sale, in spite of 302

HERITAGE there being national security, technological and heritage grounds for blocking the deal. It was not a great start. Going global is a clarion call for a Britain cut free from its treaty ties to the EU. The UK has enormous credit in the bank. In spite of the political shenanigans surrounding Brexit, its historical ties to some of the fastest growing nations in the world, including India and China, give it a head start in opening their markets to British goods and services. In the Anglosphere, which includes the United States, its biggest single trading partner outside the EU, it is helped by ties of language and free-booting economic systems. Its corporations adhere to higher environmental, social and governance standards than many other countries around the world. However, the UK will not succeed unless it exploits its heritage brands, companies and historic ties to its advantage. That will become impossible if it surrenders our greatest global companies and newer branded arrivals, such as soft drinks innovator Fever-Tree, to financialisation and overseas command and control. Nor can it afford to surrender the UK’s rich R&D in aerospace, high-tech, pharmaceuticals and fintech without putting sand in the wheels. The UK’s Competition and Markets Authority, headed by former MP Sir Andrew Tyrie, has shown an admirable willingness to intervene on behalf of the consumer and the national interest. If we are to take advantage of the UK’s sterling heritage, the government needs to intervene more readily and test inward takeovers to destruction before supporting them. The UK must also reform its diplomatic service to make it more commercially capable and be willing to use its overseas aid budgets to open up underdeveloped and emerging markets to British goods and services. Writing in the New Statesman in 2020, Jason Cowley observed: ‘No other country has allowed so many strategic industries and assets to fall into foreign ownership. We are all grappling with the consequences of this loss of control.’10 Bringing back the firms and assets lost to overseas control will be difficult but, in a limited way, it is already happening in certain industries such as water as a 303

THE GREAT BRITISH REB OOT result of public disquiet. Heritage smacks of the past, but there is huge value in ‘Britishness’ and taking control of the country’s destiny. Part of that is valuing what we have rather than regarding everything we own as having a price. The nation’s brands are highly regarded and, when properly promoted, can conquer the world – Burberry fashion at the high end and Primark no-frills clothing are cases in point. The government has the tools to broaden its horizons and go global, but it cannot do so if the best of British is overseas owned and we don’t control our own destiny. There is increasing recognition of what has been lost. Many of the UK’s largest fast-moving consumer goods companies switched from a European focus to a broader international canvas long ago. There is a recognition that the factors behind Britain’s global outlook in the more distant past will be valuable in the post-Brexit, post-Covid era. Advocates of remaining inside the EU have refused to be shaken from the narrative of the last fifty years, which directly links the UK’s progress to being part of Europe’s trade and economic bloc, but in those five decades the world has changed dramatically. Remaking our relationship with the EU and creating a more global future was never going to be easy. As will be seen in the concluding chapter, in the words of Margaret Thatcher, it is time to move the heart and soul of the nation.




Economics are the method; the object is to change the heart and soul. Margaret Thatcher, 1981 When Britain voted to leave the EU in June 2016 very few people envisaged the long timescale involved in navigating its departure. The battle to reverse the result of the referendum was, perhaps, predictable, but the paralysis of national decision-making and the scale and the passion on both sides was not anticipated. It was as if the referendum had resolved nothing. The fightback of ‘Remain’ in Parliament, on the streets of Britain and the airwaves was relentless. The frustration of the victorious ‘Leave’ voters, ignored and denigrated, was palpable. The December 2019 election, which brought Boris Johnson back to Downing Street with a large majority, should have allowed a line to be drawn under uncertainty and signalled the start of a healing process. The Brexit disarray on all sides of the political and economic divide became less relevant because possible escape routes such as a second referendum had been blocked. Boris Johnson executed the referendum decision on 31 January 2029. He and his government moved rapidly to start future trade talks not just with the EU, but with the US, Japan, Australia and New Zealand among others. Yes, there were still issues such as the rights of child refugees to join their families that would cause legislative friction in the House of Commons. What was plain, however, was that the disputative votes of the previous Commons were over and the Commons 305

THE GREAT BRITISH REB OOT reverted back to some kind of parliamentary normalcy. Calmness descended over the body politic. That calmness was interrupted in the early months of 2020 by the onset of the pandemic. The rapid spread of the disease required an unprecedented lockdown of the economy as the government and the NHS struggled to cope with the logistical, medical, economic and financial challenges of the disease. The unpredictable course of the disease and its impact on the British and global economy required interventions unheard of in peacetime, and an abandonment of the fiscal rules that traditionally govern UK budgetary policy. In a matter of a few weeks, in March 2020 the Chancellor Rishi Sunak introduced a series of measures designed to assist big corporations, small- and medium-sized businesses and the self-employed, and to encourage firms to keep workers on the payroll. At its peak, almost 9 million workers, one-third of the total workforce, were on the job furlough plan and more than half the population were receiving government support of some kind in the shape of furlough, jobseeker’s allowance, universal credit, pensions and other benefits. The government also took temporary control of the nation’s rail franchises and publicly subsidised the bus system. Cash was pumped into local authority coffers to support a social care system that was severely under stress, amid a myriad of other subventions. These would have been radical policies for a Labour government or a left-wing alliance, let alone the free market Tory administration of Boris Johnson. The goal of these interventions was to put the economy on hold or in hibernation, so that when the pandemic passed its peak the economy could be brought back to life. The objective was to create conditions that would allow what economists describe as a ‘V’-shaped cycle showing a steep downward slope followed by fast ascent out of slump back to growth. Covid-19 changed the whole financial landscape. It triggered stock market crashes which saw 306

ONWARDS AND UPWARDS major indexes savaged by falls of between 30 and 40 per cent, falls not seen since the Great Depression. Oil prices fell to their lowest levels for more than two decades. The Bank of England dramatically lowered interest rates in two separate moves to 0.1 per cent, the lowest level in British history, and the American central bank, the Federal Reserve, took similar dramatic action. A newly installed governor of the Bank of England, Andrew Bailey,1 turned on the printing press and dramatically increased the Bank’s bond buying – quantitative easing – by £200 billion to £646 billion. The Bank again stepped into the market a few months later in June 2020 and added a further £100 billion to its bond-buying programme. It also has increased the capacity for buying corporate bonds, those issued by private sector corporations, to £20 billion. The Bank was also given responsibility by the Treasury to operate the vast bail-out facility of £350 billion for large corporations. At the time of taking these dramatic steps, Bailey described conditions in financial markets as ‘bordering on disorderly’.2 The drama of the financial impact of Covid-19 was captured by the Bank’s executive director for markets Andrew Hauser: I have always had a funny feeling about Friday the 13th of March. Mark Carney’s last day in office as governor . . . with the removal vans waiting outside, I suggested the governors (Carney and his successor Andrew Bailey) meet before the weekend. The previous day had seen disorderly conditions in the US Treasury market and the biggest one day fall in equity prices since the 1987 crash. . . . It was clear that action would be needed.3

Friday, 13 March was also Mark Carney’s last chance to engage with his principal protagonists, senior economic writers from the national press and UK broadcasters. A sumptuous lunch was hosted in the Bank’s Court dining room. The normal non-alcoholic rule of Bank luncheons (in place since the late Lord Eddie George left 307

THE GREAT BRITISH REB OOT office in 2003) was suspended and the finest claret brought up from the cellars. Carney was more relaxed than I had seen him in recent times and looking forward to becoming more deeply involved in the global climate change debate. But one could not but help notice several interruptions by his private office to take ever more frantic phone calls from around the globe. A drama was being played out before our eyes, but as it was a strictly off-the-record occasion nothing said or done was to be reported! The safety net placed under the UK economy in 2020 was not enough to prevent a dramatic slump in activity, a surge in company failure, a jump in unemployment and surge in those making claims for benefits. The disruption was far greater than that caused by Britain’s departure from the EU. Evidence from history says that economies bounce back from natural disasters more strongly than when they began. But it is unclear what lasting damage a health emergency could bring if it lingers until it is fully neutralised by vaccination. As an open, outward-facing economy, Britain is far more vulnerable to global economic degradation than many of its trading partners. The Brexit referendum was a cathartic event for the UK. It offered the opportunity to release Britain from the deep divisions that were traceable back to the financial crisis and the Great Recession of 2008–09. By contrast with its continental partners, Britain enjoyed a recovery fuelled by job creation. New types of work in the digital and logistics economy lifted employment across the UK. At the start of the 2020s, employment stood at 32.8 million, or 76.2 per cent of the workforce, the highest in UK history. At 3.5 per cent, the rate of unemployment had been slashed to the lowest level since the 1970s.4 The banking system had been repaired and rendered safer. Credit was flowing again to businesses and consumers, financial market confidence had largely been restored and enterprise and entrepreneurship, aided by a long period of record low interest rates, flourished until flattened by Covid-19. Resilience and the march of technology, innovation and creativity ought to have inspired and reinvigorated national pride and 308

ONWARDS AND UPWARDS confidence, but the distorted narrative surrounding Brexit and deeply felt views on both sides of the European debate snuffed out optimism. People were back at work, but the financial crisis was a severe blow to the incomes of ordinary British households. Important and necessary changes to the social security system, notably the introduction of Universal Credit, were botched. Nevertheless, it became the instrument of choice for delivering income to hard-pressed households when the coronavirus struck. In spite of the problems of implementation and the hardship involved in payment delays, the reformed approach to benefits had a galvanising impact on the labour market. Only those at the very top of the corporate and professional tree, chief executives and bosses of the FTSE 350 companies, private equity princelings and City lawyers and professionals looked to be thriving. Governance at Westminster, in the boardroom and across large swathes of the country disappointed citizens and left them frustrated. It was the perceived inequality of opportunity, a resentment of the elites and a belief that, somehow, the government had been wrenched away from the UK’s own people that created a damaging dissonance. The frustration of Boris Johnson’s top adviser, Dominic Cummings, with traditional Civil Service recruitment was reflected in his post-election call for new voices in government and among Whitehall advisers. For many UK citizens, power and influence was perceived to rest far away in Europe and the country was more politically, socially and economically divided than in living memory. This was not just a British phenomenon, even though there is a tendency to sometimes think that a smallish country in the windy north-west corner of Europe is the centre of the universe. However, the UK has not been alone in feeling an unusual sense of dislocation. Large parts of the rest of the world, including our neighbours in Europe, shared the same sense of helplessness in the face of broader forces. The loss of control and the mood of vulnerability in the face of global economic upheaval manifested itself in the strengthening 309

THE GREAT BRITISH REB OOT empowerment of extremist, populist parties, ranging from the National Rally (Rassemblement National, the former Front National) in France to the AfD movement in Germany, and on the far right the ruling Fidesz and extremist Jobbik parties in Hungary. In the United States, a mercurial, populist leader, Donald Trump, with an ‘America First’ message straight out of Sinclair Lewis’s 1935 novel It Can’t Happen Here ended up in the White House. Resentment raged in America’s poorest black and minority neighbourhoods when Covid-19 brought the US economic locomotive to a grinding halt. The UK’s response to the broader forces of disaffection, inequality, global change and frustration with both Westminster and corporate governance resulted in the Brexit decision. It has been portrayed as a national act of self-harm by comfortable sections of the population who voted Remain, but for the majority it was a cry for change, a chance to throw off the shackles of the past, escape from regional inequalities and what had gone before and create a different Britain. The success of the Brexit campaign and the reasons why so many voted to leave the EU has been disparaged by those who lost the referendum, which was less than noble. Some of the disaffected voted against large-scale immigration into a country seen by sections of the population as already ‘too full’, which was clearly a factor. The reality is rather different. Most of the evidence shows that immigration has been an engine of growth and contributes to the sustainability of the public finances.5 Britain’s more open borders have actually differentiated the UK – in terms of output, opportunity and a younger population – from much of the industrial world. It has helped reinvigorate the skills and attitudes of the workforce. Among other things, the UK’s world-class universities are a terrific draw. In 2019, the Higher Education Statistics Agency found that the number of students from China alone rose by 13 per cent to 120,000. The numbers of students from the EU and India also rose sharply. Even if a small 310

ONWARDS AND UPWARDS proportion of this well-educated universe were to stay in the UK it would expand the pool of talent. In particular, those returning to China and India were unlikely to forget the formative experience of being in Britain, the quality of the work being done in the universities in which they studied and how it assisted in facilitating their skills in English. That legacy should serve the UK well in the shape of a cadre of young ambassadors as it seeks to establish a deeper and broader global presence. In the endless debates about Brexit there was also much talk about taking back sovereignty. The tendency among those who wished to remain fully functioning members of the EU was to regard those who favoured the UK’s divorce from Brussels as leading the UK down a narrow ‘little England’ alley; that was doubtless the case for some of the disaffected. The reality is that Brexiteers such as Prime Minister Boris Johnson, with his much-derided slogan of ‘Global Britain’, have a broader vision of a less regulated and open UK looking over the horizon beyond Europe. There is a recognition that the world economy had changed dramatically and that the digital age has smashed physical borders. Each time we type ‘www’ into our mobile devices one is instantly reminded of that. It was the world wide web – not the English web or the EU web – that was created by British pioneer Sir Tim Berners-Lee. Silicon Valley digital giants recognise no borders, though tax authorities across the world would prefer that Facebook et al. paid their ‘local’ taxes. China, for its part, has tried to make access to the internet difficult for its citizens; its government prefers that users access homegrown pioneers such as Alibaba and Ant Financial. Suppressing and resisting the lure of digital giants Apple and Amazon would be a fruitless exercise – both of their stock market values exceeded $2 trillion in 2020. They are part of a world without borders that largely ignores the disciplines of trade deals and blocs. The risks around Brexit have always been that the UK would lack the confidence and ambition to move forward with its divorce plans. 311

THE GREAT BRITISH REB OOT In the immediate aftermath of the 2016 referendum those who opposed leaving felt that the tide could be turned. They were empowered in their confidence by a divided Parliament where various Brexit formulations struggled to gain a majority. There was also an awareness that when referendums failed at first time round, EU member countries, with the assistance of Brussels, would overturn the result. The EU sought to make the UK’s retreat as difficult and as expensive as possible in the hope that it would change hearts and minds. The views of Brexit-minded citizens, especially those in the left-behind regions, were never going to shift, but there was an impact on opinion formers in Parliament, among groups representing business and in the City, including some New York bankers who had made the UK a second home for finance. In many ways the obstacles were made of straw. A myriad of difficulties were placed in the path of Brexit. The high fiscal cost of leaving was among the first to be actively discussed. Issues were also raised concerning the status of Europeans living and working in Britain and Brits in Europe. Among the most toxic and difficult to resolve puzzles was what kind of land border would be created between the Republic of Ireland and Northern Ireland. Japanese car makers warned that Brexit would damage justin-time production schedules and impact on future investment. American bankers such as Jamie Dimon of J.P. Morgan cautioned that thousands of City jobs would migrate to Europe. This would lead to gradual decline of the City as one of the world’s great financial centres. Dimon followed through when, in early 2020, his bank opened a new seven-story office in Paris. However, in spite of the threatened migration of financial posts from London, much of the traffic turned out to be in the other direction. The Civil Service played its role in ramping up Brexit fears, especially that of a ‘No Deal’ cliff-edged Brexit. News broadcasts were peppered with nightmare visions of queues of trucks lining up at Dover on the Kent coast – one of the main crossings for shipments from the Continent – stretching all the way down to the 312

ONWARDS AND UPWARDS West Country. The fears were of a nation without toilet paper, pharmacies without vital drugs, supermarkets without vegetables and soaring prices in the shops. None of this could actually be ruled out, but it was hard to believe that in one of the most competitive and sophisticated grocery markets in the world, brilliantly run companies that had three years to prepare contingency plans for supply problems had not done so. The chairman of one of the bigger supermarket groups, an outspoken supporter of Remain, personally chastised me for what he said was the ‘ridiculous’ suggestion that some vegetables could be air freighted rather than driven by lorry to the UK. Of course it would be frightfully expensive and the carbon footprint would be high, but it was worth noting that more than 60 per cent of the nation’s fruit is imported from every corner of the world. Bananas from the Caribbean, avocados from Peru, dates from the Palestinian territories, strawberries from Israel, flowers from Kenya and so on. The supermarkets demonstrated long before Brexit came over the horizon that when it comes to building global supply chains for potentially perishable products they had both the experience and expertise. More remarkable is that no sooner had Boris Johnson been elected with a secure majority in December 2019 than the terms of the debate changed almost overnight. The big argument was not about the Irish border, but how quickly devolved government in Northern Ireland could be restored. As it turned out, power sharing was reconstituted in the early days of January 2020. The discussion was now no longer about whether the Civil Service was equipped to deliver Brexit, but how quickly it could be retasked to fulfil the Conservatives’ election promises of ‘levelling up’ the North. As part of that rebalancing of economic and political power, there was even the suggestion that the House of Lords, the second and larger Westminster chamber, could move to York. The question after the December 2019 election was not whether infrastructure investment would be upgraded, but about how quickly. It was not about whether HS2 should be scrapped, but 313

THE GREAT BRITISH REB OOT whether it can be saved from those who would gold plate it to the point that public support can no longer be maintained. Brexit made it even more imperative that the UK needed to have worldclass connectivity, both physical and broadband, if it was to compete effectively on the global stage. As sections of the workforce retreated to home working in 2020, little-known digital applications such as the conferencing site Zoom came into their own, and the value of having best-in-class broadband, 5G mobile phone networks and all-round connectivity became more obvious. Telecoms operator Ofcom reported that UK broadband speeds ‘withstood a surge in demand during lockdown’.6 But it also pointed out that just 3.5 million homes in Britain, or 12 per cent, have access to full fibre broadband. This book – written in the teeth of the Covid-19 lockdown of 2020 – is intended to act as a sharp reminder that, although there is much that needs to be fixed in Britain, in particular the reskilling of sections of the workforce, the base for a modern technology-led economy is already here. There is a huge difference between Britain’s best-run companies (some overseas owned) and its worst, but corporate Britain can be improved and the left-behind regions can be levelled up. Instead of seeing the economic glass as half empty, it has to be viewed as half full. Take climate change, for example. Extinction Rebellion may have brought the streets of London to a halt in 2019, but the rebels conducting yoga classes on Westminster Bridge were preaching to the converted. Big mistakes had also been made on the climate change front. One such error was the government auction of the Green Investment Bank to Australian private equity marauders Macquarie, in April 2017. As an institution successfully backing public–private projects, the five-year-old bank was a ready-made institution to take forward investment in green projects. The UK was already on that road. Rolls-Royce has well advanced plans for e-aircraft and had the capability to build modular nuclear reactors. Melrose is at the forefront of engineering on the e-drive 314

ONWARDS AND UPWARDS (drive shaft) for next generation electric cars. Johnson Matthey, pioneers in cleaner emission catalytic converters, was in the midst of a big R&D programme to develop greener technologies such as advanced batteries. Laboratories up and down the country are working on fuel cell technology, and offshore wind farms have become an important part of the national grid. However, much of this is piecemeal, and a sense of urgency needs to be instilled. For instance, one only has to look at the resources that were poured into Bletchley Park during the Second World War. With the energy, willpower, imagination and the resources of corporate Britain and the government, anything can be achieved. The pull of the UK’s research-based universities, it’s creative and design industries and its sports franchises are already international, but Europe is still important as a supplier of scientists and technicians for the universities, and as a market. Horizons, however, need to be broader. The UK needs to draw in talent from the whole world and recognise, develop and exploit the global markets hungry for UK creativity and products. The nation’s leading-edge products range from Harry Potter to smart chips for mobile phone displays, but it is much broader than that. Europe’s approach to internet pioneers and global entertainment providers is to tie them down with excessive regulation rather than allow a thousand flowers to bloom. That is why almost all of the FAANGS – Facebook, Apple, Amazon, Netflix, Google and Spotify – see the UK as a great place to put down roots in Europe. Much of the negativity about the UK that was heard in the run-up to Brexit and the post-election period was a chimera. Economics tells us that our greatest trading advantage lies with our nearest neighbours, but what if the economies of those neighbours become sclerotic and the opportunities move elsewhere? That is where a rebooted Britain must look. In spite of all the uncertainty unleashed by Leave and the coronavirus, the UK continues to outperform many of its competitors, especially in the fast-growing areas of science, innovation and services. 315

THE GREAT BRITISH REB OOT Inward investment in UK tech has been as strong as ever in the years following the referendum, which surged by 44 per cent to $13.2 billion in 2019.7 That is more than Germany and France combined. The level of investment in the UK makes it third in the world, behind the US and China. Even as the coronavirus wreaked havoc, UK tech companies raised $5.3 billion between January and May 2020, more than firms in Paris, Stockholm, Berlin and Tel Aviv combined.8 As the economy is restructured, the challenge for technology in the UK is to make sure that the intellectual property, patents and skills remain in Britain. Far too many of our start-ups have been gobbled by overseas predators. If they are allowed to mature, Silicon Fen, Cambridge and Oxford, the heartlands of British invention, could become the next Silicon Valley. For that to happen, venture capital in the UK needs to be beefed up. The British Investment Bank needs to be supported and properly financed so that it can get behind science and tech in the less fashionable parts of the country. The government needs to redefine competition policy and look at transactions through the broader national interest. However, not all foreign takeovers are about capturing UK skills and technology. Comcast’s purchase of Sky was about building on UK technology excellence and creativity. The commitment of £2 billion of extra investment into the studios at Elstree in Hertfordshire is a recognition that the UK may not have its own Hollywood, but it has creative human and tech infrastructure that is as good as anywhere else in the world. Confidence in the UK’s film sector was shown in February 2020 when Belfast Harbour9 revealed that it would be investing in six further studios in Northern Ireland, creating the largest studio complex outside the South East of England. The Titanic Studios in Belfast has proved its value as the home of the global cult series Game of Thrones. The progress of companies sold into overseas ownership, such as Softbank’s £23 billion purchase of Cambridge smart chip maker Arm Holdings in 2016, is almost impossible to track. The underlying 316

ONWARDS AND UPWARDS picture was disguised by the financially driven changes in shareholdings and disposals that followed. However, government intervention to prevent such takeovers in free market economies is generally frowned upon. Challenge needs a degree of bravery and vision; it requires governments and regulators to recognise that financially driven mergers, especially those involving free-wheeling, short-termist and secretive private equity companies, rarely work in the public interest. It is sheer madness that the taxpayer, through the education system, helps create the minds, science, code, software and technology behind Britain’s digital revolution, much of which is then carelessly discarded. With the right R&D and tax incentives, the UK could better assure that technologies created in the UK stay in the UK. Brexit can only work if there is a wholesale change in attitudes inside the government, Whitehall, the regulators, in the boardrooms and among the big battalion investors. Covid-19 could, oddly enough, be the catalyst for encouraging those changes in much the same way as it has lifted the stigma over bigger government interventions in the private sector. Anglo-Saxon capitalism is excellent at exploiting ideas and technology and converting them into wealth, but, as the Nobel prize-winning economist Joseph Stiglitz argues: ‘Unregulated markets for goods have been shown not to work; and it turns out unregulated markets for ideas don’t either.’10 In Britain there has been a fixation about not repeating the mistakes of the 1970s, when it was fashionable for government to intervene to save failing companies. But in the face of the health emergency of 2020 the government had to grit its teeth and intervene. There is never a case for saving badly run companies, but there is a need for a long-term vision to value the engineering, technology and intellectual property inside a badly run enterprise. The most dramatic example of which took place in 1971 when, amid much recrimination, the Tory government of Ted Heath stepped in to bail-out the ailing Rolls-Royce aero-engines company. Heath and his ministers recognised that intervention would not only save jobs, 317

THE GREAT BRITISH REB OOT it would also save the research and engineering values inside the company. Whereas the costly development of the RB211 engine led to the group bleeding cash, some five decades later a modern derivative of that same engine, the Trent 1000, rules the skies with record order books for fitting these engines on wide-bodied jets. Famous car marques and engineering, such as Land Rover and Mini, once part of serial failure British Leyland, still live and prosper. It is one of the paradoxes that the UK has the most sophisticated and wealthy financial services sector in the world in the form of the City of London, but that resource has not been used for the betterment of the broader public interest. Speedier returns can be obtained by creating new financial products and providing financial advice on takeovers and mergers or simply trading rather than investing for the long-term. Britain’s once dynamic merchant banks saw assisting business as part of their role, but most of these famous names, such as SG Warburg, Robert Fleming and the investment banking arm of Schroders, are now owned by Wall Street and other continental giants. The ring-fenced London clearing banks could do much more to support enterprise. New tech-based banking platforms such as HSBC Kinetic could do precisely that. The end of the era of uncertainty also offers the prospect that stored corporate cash – some £750 billion of it on FTSE 350 balance sheets – could be unleashed to invest in the UK. So, the UK has the resources, the skills, the universities and the enthusiasm for capitalism and entrepreneurship to remake itself into a global powerhouse, but it won’t just happen. It is going to require the creation of the right climate, a climate that rejects financial engineering in favour of long-term investment in industry. It will also require a change in a Whitehall that is hidebound by low ambition and fiscal timidity. There is so much that is excellent in British commerce, but there is so much more to do if the UK is to successfully ride the third industrial (digital) revolution and restore its reputation as a 318

ONWARDS AND UPWARDS global powerhouse. If this book seems to be unremittingly optimistic about Britain’s universities, its technology and its creative and financial service, it needs to be. These are the industries that must be rebooted, supported and developed if the UK is to prosper after Brexit. It won’t be easy. An intense drive to fix the domestic problems of under-investment in infrastructure, the damaged social contract between the have and have nots and the misfiring political system is also necessary. All of this must be attended to while repairing the damage caused by Covid-19 – in particular the prospects for the young – and moving rapidly towards a low-carbon agenda and concluding far-reaching trade agreements. Ballooning levels of government borrowing and debt as a result of the coronavirus, with borrowing climbing to up to 15 per cent of GDP and debt equal to our national output, might appear an anvil around the UK’s neck. Covid-19 required the UK to move to a wartime footing. Some of the expenditure, such as the cost of furlough, will be short term and should vanish from the nation’s balance sheet in 2021. What the pandemic demonstrated is that there are alternatives to austerity and cutting the size of the state in an era of low interest rates as long as governments stick to established monetary and fiscal rules. A more open approach to sinking taxpayer funds into next-generation infrastructure, training and apprenticeship and support for R&D could deliver huge long-term benefits. The challenges cannot be underestimated, but the glorious benefits of Rebooting Britain now for the generations to come could leave a legacy as long lasting as that of the nation’s Victorian forerunners.



1  Land of Hope and Enterprise   1. Office for National Statistics, GDP (average) per head, quarterly data, 2016 prices.   2. Andy Haldane, interview with the author, January 2019.  3. Ibid.  4. ‘Apple Buys UK Photography Start-up Spectral Edge’, Financial Times, 13 December 2019.   5. ‘US Anger at Britain Joining Chinese-led Investment Bank AIIB’, Guardian, 12 March 2015.   6. Joseph S. Nye, ‘Why the Gulf War Served the National Interest’, Atlantic, July 1991.   7. Paul Johnson, conversation with the author, May 2020.   8. ‘Key Facts About the UK as an International Financial Centre 2019’, The CityUK, (accessed 30 June 2020).   9. A. Brummer, Britain for Sale: British Companies in Foreign Hands – The Hidden Threat to Our Economy, London: Random House Business Books, 2012. 10. Industrial Strategy: Building a Britain Fit for the Future, London: HM Government, 2017. 11. Andrew Hilton, conversation with the author, May 2020.

2  Brave New World   1. Ruth Gregory, ‘Brexit Will Hold Back the Recovery’, Capital Economics, 15 June 2020, uk-economics-update/brexit-will-hold-back-the-recovery/ (accessed 30 June 2020).   2. Measured by the percentage of people living on the equivalent of US$1.90 or less per day in 2011 purchasing price parity terms.  3. IMF, World Economic Outlook, October 2019: Global Manufacturing Downturn, Rising Trade Barriers, Chapter 1, ‘Global Prospects and Policies’, (accessed 30 June 2020).   4. Graham Allison, Destined for War: Can America and China Escape Thucydides’ Trap?, Boston, MA: Houghton Mifflin Harcourt, 2017.   5. ‘OECD Sees Deepest Peace-time Slump in a Century’, Reuters, 10 June 2020.   6. Mark Carney, ‘The Global Outlook’, speech given at the Financial Times event, Frobisher Hall, 12 February 2019, speech/2019/mark-carney-speech (accessed 30 June 2020).   7. Shantayanan Devarajan, interview with the author, May 2018.


NOTES to pp. 33–56   8. Crispin Tickell, ‘How Britain Negotiated Its Entry to the EEC – Then Failed to Play Its Part’, Guardian, 25 June 2016.   9. Guy Chazan, ‘Macron and Merkel Sign Aachen Treaty to Deepen FrancoGerman Ties’, Financial Times, 22 January 2019. 10. ‘ECB Boosts Bond-buying Stimulus Package by €600bn’, Financial Times, 4 June 2020. 11. ‘EU Aims to Back Struggling South with Fiscal Shock and Awe’, Bloomberg, 27 May 2020. 12. Crispin Tickell, ‘How Britain Negotiated Its Entry to the EEC – Then Failed to Play Its Part’, Guardian, 25 June 2016. 13. Ben Broadbent, ‘Winners from Globalisation’, speech to the Scottish Council for Development and Industry, Aberdeen, 11 July 2017. 14. Chris Giles, ‘What has the EU Done for the UK?’, Financial Times, 31 March 2017. 15. Patrick Minford and Molly Scott Cato, ‘Will Brexit Boost or Hurt the Economy?’, Guardian, 21 August 2017. 16. Hayley Jarvis, ‘Europe, Not Thatcher, Reversed UK Economic Decline’, Brunel University London, 10 May 2017, (accessed 30 June 2020). 17. James Bartholomew, ‘The EU has Destroyed Some of Our Most Prosperous Industries’, Daily Telegraph, 21 May 2016. 18. Heather Stewart, ‘Osborne Bats for Bankers’ Bonuses Citing Risk to City from EU Cap’, Guardian, 25 September 2013. 19. The G20 comprises Argentina, Australia, Brazil, Canada, China, the European Union, France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey, the United Kingdom and the United States. 20. IMF, United Kingdom: 2018 Article IV Consultation, Country Report No. 18/316, November 2018. 21. Patrick Minford, Should Britain Leave the EU? An Economic Analysis of a Troubled Relationship, 2nd edn, Cheltenham: Edward Elgar, 2015. 22. Chris Giles, ‘The Latest Pro-Brexit Analysis Has Got Its Sums Badly Wrong’, Financial Times, 21 February 2018. 23. Patrick Minford, ‘Pro-Brexit Analysis Figures Add Up Perfectly, In Fact’, letter, Financial Times, 26 February 2018. 24. Ben Chu, ‘Give Us Credit for Avoiding Post-Brexit Vote Financial Crisis, Says Bank of England Governor Mark Carney’, Independent, 21 February 2017. 25. Gita Gopinath, ‘Tentative Stabilization, Sluggish Recovery’, IMF Blog, January 2020, (accessed 30 June 2020). 26. ONS, UK Labour Market: January 2020, uklabourmarketjanuary2020 (accessed 30 June 2020). 27. Andrew Jones, interview with the author, March 2018. 28. Andy Haldane, interview with the author, January 2019. 29. Ibid. 30. HM Treasury, ‘Future Fund Launches Today,’ 20 May 2020, uk/government/news/future-fund-launches-today (accessed 30 June 2020). 31. Mariana Mazzucato, The Value of Everything: Making and Taking in the Global Economy, London: Allen Lane, 2018. 32. Andrew Jones, interview with the author, March 2018.


NOTES to pp. 56–78 33. ‘Results of the Public Consultation on the Top 10 Most Burdensome Legislative Acts for SMEs’, European Commission, 2012, https://ec.europa. eu/info/index_en (accessed 30 June 2020). 34. Founded in 1967, ASEAN consists of ten countries: Indonesia, Malaysia, the Philippines, Singapore, Thailand, Brunei, Laos, Myanmar, Cambodia and Vietnam. 35. Shantayanan Devarajan, interview with the author, 2018. 36. Sajid Javid, ‘Forget Staying Close to EU after Brexit’, Financial Times, 17 January 2020. 37. Liam Fox, ‘Road to Brexit’, Speech at Bloomberg, 27 February 2018 https:// 38. Bruno Maçães, The Dawn of Eurasia: On the Trail of the New World Order, London: Penguin, 2018. 39. Gary Gibbon, ‘Brexit vs the World: Is Britain Too Self-obsessed?’, Politics: Where Next? podcast, 8 March 2019. 40. Department for International Trade, 20 December 2018, government/organisations/department-for-international-trade (accessed 30 June 2020). 41. Economist Intelligence Unit, ‘Out and Down: Mapping the Impact of Brexit’, 27 March 2018. 42. Home Office, The UK’s Points-Based Immigration System: Policy Statement, 19 February 2020, (accessed 19 June 2020).

3  Masters of the R&D Universe   1. Pascal Soriot, Zoom interview with the author, 10 June 2020.   2. ‘GSK Announces Intention to Produce 1 Billion Doses of Pandemic Vaccine Adjuvant System in 2021’, GSK Press Release, 28 May 2020, London.   3. MedImmune, originally known as Molecular Vaccines, was bought by AZ in 2007. On 14 February 2019 it was renamed AstraZeneca.   4. Interview with the author, November 2018.  5. ‘The Future of Research. The £18 Billion Question’, The Economist, 29 February 2020.   6. ‘Faster Diagnosis from “Transformational” Gene Project’, Fergus Welsh, BBC News, 5 December 2018.  7. HM Government: Industrial Strategy, Building a UK Fit for the Future, White Paper, 2017, (accessed 30 June 2020).  8. Times Higher Education, World University Rankings 2018.  9. Cambridge University Reporter, 14 December 2017, https://www.reporter. 10. BBC News website, 5 December 2018, 11. Pascal Soriot, interview with the author, November 2018. 12. Ibid. 13. Imperial College website, 14. UCL website, 15. The Economic Impact of Russell Group Universities, London: London Economics, October 2017.


NOTES to pp. 78–97 16. Ibid. 17. Southampton University Science Park, university+of+southampton+science+park&rlz 18. Peter Birkett, interview with the author, May 2018. 19. Post-16 Skills Plan and Report of the Independent Panel on Technical Education, July 2016, 20. ‘Tony’s Legacy to Tony’, Guardian, 19 February 2007. 21. ‘The Fall of the Meritocracy’, The Spectator, 29 January 2011. 22. ‘Michael Gove: Radical, Controversial and Divisive’, BBC News, 15 July 2014, 23. ‘Pisa Tests: UK Rises in International Rankings’, BBC News, 30 December 2019, 24. ‘A-level Results Day LIVE: Joy, Celebration (and a Few Tears) as Teenagers across the Country Receive Their Grades’, Daily Mail, 16 August 2018. 25. Times Higher Education, 19 March 2013. 26. Apprenticeships: Report of Parliamentary Sub-Committee on Education, Skills and the Economy, March 2017. 27. ‘Dyson Has Scrapped Its Electric Car Project’, BBC News, 11 October 2019. 28. James Dyson interview, ‘Vacuums Are Already Smarter than People’, Guardian, 9 May 2014. 29. Innovation and Research Strategy for Growth, Department for Business, Innovation and Skills, December 2011. 30. N. Moran, ‘UK Sets Out Future Strategy for Research and Innovation’, website, 5 July 2017. 31. ‘UK sets out future strategy for research and innovation’, Science Business, 5 July 2017, 32. Professor Mark Walport’s speech to the Royal Society: ‘Research Culture: Changing Expectations’, 30 October 2018. 33. Ibid. 34. The Haldane principle is the idea that decisions about what to spend research funds on should be made by researchers rather than politicians. It is named after Richard Burdon Haldane who, in 1904 and from 1909 to 1918, chaired committees that recommended this policy. 35. Higher Education Statistics Agency, 2017, 36. J. Adams, ‘We Need to Rethink Research Funding for UK Regions to Prosper’, Guardian/Higher Education Network, 5 June 2017. 37. ‘Big Pharma Boost for Brexit’, Financial Times, 27 November 2017. 38. Budget 2020: Delivering on Our Promises to the British People, HM Treasury HC121, March 2020. 39. ‘Surging R&D Spending in China Narrows Gap with US’, Science, 10 October 2018. 40. The UK’s Future Skills-based Immigration System, policy paper, HM Government Cm. 9722.

4  White Hot Technology   1. P. Campbell, ‘UK Sees an Opening to Overtake US and China in Driverless Cars’, Financial Times, 2 January 2018.  2. Self-driving Cars: Are We Ready?, KMPG report, 2016.


NOTES to pp. 98–125   3. ‘Jaguar to Supply 20,000 Cars to Waymo’, Guardian, 27 March 2018.   4. ‘Dyson Has Scrapped Its Electric Car Project’, BBC News, 11 October 2019.   5. A. Brummer, Britain for Sale, London: Random House Business Books, 2012.   6. C.P. Snow, ‘The Two Cultures’, Rede Lecture, Cambridge University Press, 1959.   7. ‘Foreign Investment in UK Technology Firms Doubles in One Year’, Daily Telegraph, 10 June 2018.   8. M. Ridley, ‘Britain Can Show the World the Best of AI’, Daily Telegraph, April 2018.   9. Based on share value in June 2020 after Ocado raised a further £1 billion for new investment in technology. 10. Laserlines website case study, 2018, 11. M. Pooler, ‘Siemens to fund 3D printing facility in West Midlands’, Financial Times, 19 March 2018. 12. BBC News, 25 August 2018, 13. International Data Corporation, November 2016, 14. ‘Automation Readiness Index and Global Rankings for Robotics and AI’, ABB and the Economist Intelligence Unit, 23 April 2018. 15. London & Partners,, 12 January 2017. 16. ‘Tailwinds: 2018 Airline Industry Trends’, PwC, 10 April 2018. 17. ‘Boeing HorizonX Invests in Reaction Engines, a UK Hypersonic Propulsion Company’, Sir Michael Arthur, Boeing News Release, Chicago, 12 April 2018. 18. ‘Theresa May Pledges to Boost Aerospace Amid Brexit Fears’, BBC News, 16 July 2018. 19. House of Lords Committee report, UK.GOV website, March 2018. 20. ‘US Kills Iran General Qassem Suleimani in Strike Ordered by Trump’, Guardian, 3 January 2020. 21. PwC,, May 2018. 22. N. Gould, ‘Ransomware Attack on Travelex Leads to Website Shutdown’, Cyber Security, January 2020. 23. ‘Britain’s Cyber Security Bolstered by World-class Strategy’, GOV.UK website, 1 November 2016. 24. ‘Darktrace Leads the Way to Automatic Cyber Security’, ComputerWeekly. com, 6 July 2016. 25. ‘Britain’s Tech Industry Shrugs Off Brexit Fears with Record £9 Billion Investment’, Daily Telegraph, 21 November 2019. 26. PwC,, May 2018. 27. G. Grech, ‘Can the UK Lead in Tech?’, Daily Telegraph, 14 August 2019. 28. ‘High-value Tech Jobs Boom Across the UK’, Tech Nation, 12 June 2018.

5  Creative Genius: Gaming to the Oscars   1. S. Friedman, ‘The Final Curtain Call for British Theatre?’, Observer, 14 June 2020.   2. ‘Google’s AlphaGo AI Defeats Human’, Guardian, 9 March 2016.   3. The Russell Group was formed in 1994 by eighteen British research universities – Birmingham, Bristol, Cambridge, Edinburgh, Glasgow, Imperial College London, Queen Mary University of London, Leeds, Liverpool, London School of Economics, Manchester, Newcastle, Nottingham, Oxford, Sheffield, Southampton, University College London and Warwick.


NOTES to pp. 126–151   4. ‘Israel’s Mobileye Bought by Intel for $15 Billion’, Haaretz, 17 May 2018.   5. Google renamed its parent company Alphabet in 2015 so as to recognise the many new activities in which it was investing, including AI leader DeepMind.  6. GVA measures the value of a particular industry or region to the whole economy.   7. Interview with the author, August 2018.  8. Data from Ukie, the games and interactive entertainment industry body,   9. J. Batchelor, ‘GTAV Is the Most Profitable Entertainment Product of All Time’, website, 9 April 2018. 10. Author interview with John Kampfner, August 2018. 11. Video or audio content sent in compressed form over the internet and played immediately. 12. ‘US Film Studios to Build £150m Reading Production Hub’, Financial Times, 18 February 2020. 13. ‘Amazon Pays $250m to Sign Departing Top Gear Trio for New Show’, Financial Times, 30 July 2015. 14. Ofcom, Media Nations report, August 2018. 15. R. Seales, ‘The Crown: Does Netflix Series Cost More than the Actual Queen?’, BBC News, 25 December 2017. 16. Pottermore website, replaced by, February 2018. 17. M. Paulson, ‘Another Harry Potter Landmark: At $68 Million, the Most Expensive Broadway Nonmusical Play Ever’, New York Times, 14 April 2018. 18., 23 March 2017. 19. ‘George Osborne Announces Another New Star Wars Film to be Made in Pinewood’, Daily Telegraph, 10 June 2014. 20. P. Bradshaw, ‘Star Wars: The Last Jedi Review – An Explosive Thrill-ride of Galactic Proportions’, Guardian, 13 December 2017. 21. A. Monaghan, ‘Spotify’s Stock Market Debut: Everything You Need to Know’, Guardian, 3 April 2018. 22. Skepta was referring to the fire in London’s North Kensington neighbourhood in which seventy-one people died. 23. ‘Stormzy Launches Cambridge Scholarship for Black Students’, BBC Newsbeat, 16 August 2018. 24. John Kampfner, interview with the author, August 2018. 25. Jaguar website, 26. See, 14 March 2017. 27. Global Talent, Global Reach report, RIBA, 7 December 2017. 28. B. Darbyshire, Financial Times, December 2017. 29. ‘London Fashion Week September 2018 Facts and Figures’, Oxford Economics, 30. ‘Premier League Remains World’s Richest’, Guardian, 12 July 2017. 31. Deloitte, Roar Power: Annual Review of Football Finance, 27th edn, 2018, 32. ‘How Do You Make, or Lose, Money in Formula 1?’, BBC News website, 29 September 2014. 33. Tony Hall announced that he would be leaving the BBC in January 2020.


NOTES to pp. 15 4–18 1 34. ‘Licence Fee Income of the BBC in the United Kingdom (UK) from 2010 to 2019’, Statista Research Department, 20 September 2019, https://www. (accessed 30 June 2020). 35. S. Block and M. Samuels, ‘The Windermere Children’, BBC TV, 27 January 2020. 36. M. Billington, ‘The Pope: Anton Lesser and Nicholas Woodeson’s Papal Powerplay’, Guardian, 13 June 2019.

6  The Moneytree: Greed, Locusts and Hipsters   1. Philip Jansen was appointed chief executive of telecoms concern BT in 2019.   2. Coronavirus Business Interruption Loan Scheme (CBILS) offered loans of up to £5 million to SMEs. The Bounce Back Loan Scheme (BBLS) provided loans to micro-enterprises with a 100 per cent government guarantee.   3. Covid Corporate Financing Facility (CCFF).  4. PRA statement on deposit takers’ approach to dividend payments, share buybacks and cash bonuses in response to Covid-19, Bank of England, 31 March 2020.   5. Twenty-seven countries since 31 January 2020, when the UK formally left the EU.   6. J.E. Stiglitz, The Euro and Its Threat to the Future of Europe, London: Allen Lane, 2016.   7. EU regulation No. 236/2012 on short selling and certain aspects of credit default swaps, came into force on 1 November 2012, European Securities and Markets Authority notice.   8. ‘EU Agrees to Cap Bankers’ Bonuses’, Financial Times, 28 February 2013.  9. ‘Paris: A Rather Exclusive Global Financial Centre’, Financial Times, 29 February 2020. 10. Key Facts about the UK as an International Financial Centre 2018, London: TheCityUK, October 2018. 11. Ibid. 12. ‘HSBC Planning to Shift 1,000 Jobs to Paris’, Huffington Post, 10 January 2017. 13. Bank of England, Inflation Report – May 2019. 14. IMF Discussion Note, ‘Fintech and Financial Services: Initial Considerations’, June 2017 (SDN/17/05). 15. Stephen Jones resigned from UK Finance on 17 June 2020 after acknowledging he had made ‘wholly inappropriate comments’ about financier Amanda Staveley while working on a rescue for Barclays in 2008. 16. Stephen Jones, interview with the author, 1 November 2018. 17. Key Facts about the UK as an International Financial Centre 2018, op. cit. 18. Lulu Yilun Chen, ‘Ant Financial Annual Profit Jumps 65% Ahead of Anticipated IPO’, Bloomberg, 4 May 2018. 19. D. Ramsden, ‘Resilience and Innovation in Post-trade’, Speech to the Association of Financial Markets in Europe, Bank of England, 8 May 2019. 20. Ibid. 21. C. Morrison, ‘TSB IT Meltdown Cost Bank £330m and 80,000 Customers’, Independent, 1 February 2019. 22. Stephen Jones, interview with the author, 1 November 2019. 23. J. Haskel and S. Westlake, Capitalism without Capital: The Rise of the Intangible Economy, Oxford: Princeton University Press, 2018.


NOTES to pp. 18 1–203 24. Industrial Strategy: Building a Britain Fit for the Future, UK.GOV, 2017. 25. ‘Macquarie Completes £2.3 Billion Green Investment Bank Deal’, Financial Times, 18 August 2017.

7  A Nation Divided: The Battles of Geography, Generations and Goods  1. Theresa May left office in July 2019 after failing to achieve a Commons majority for an agreement governing the UK’s exit from the EU.   2. ‘Ethnicity Pay Gaps in Great Britain: 2018’, ONS, 9 July 2019, https://www.ons. (accessed 30 June 2020).   3. Lipton stepped down in February 2020 as part of a management reshuffle by new managing director Kristalina Georgieva.   4. Author’s interview with David Lipton, then deputy managing director of the IMF, April 2016.   5. N. Shafik, ‘A New Social Contract’, Finance & Development 55(4), December 2018.   6. Edward Heath was UK prime minister 1970–74.   7. James Callaghan was UK prime minister 1976–79.  8. A. Beveridge, ‘Social Insurance and Allied Services’, 25 November 1942, pdf (accessed 30 June 2020).   9. D. Willetts, The Pinch: How the Baby Boomers Took Their Children’s Future – And Why They Should Give It Back, London: Atlantic Books, 2010. 10. J. Bristow, ‘From Brexit to the Pensions Crisis, How Did the Baby Boomers Get the Blame for Everything?’, British Journal of Sociology, re-published on the LSE website in February 2017, how-did-the-baby-boomers-get-the-blame-for-everything/ (accessed 30 June 2020). 11. ‘The Over-fifties Have Gambled Away My Generation’s Future’, Philip Bronk, Letter to the Editor, Independent, 26 June 2016. 12. C. Bickerton, ‘The Roots of Brexit Lie in Britain’s Broken Growth Model’, LSE blog, 23 August 2018, (accessed 30 June 2020). 13. Eurostat: Unemployment statistics, May 2019. 14. ‘Youth Unemployment’, House of Commons Library, June 2019. 15. Resolution Foundation, A New Generational Contract: Final Report of the Inter-generational Commission, May 2018. 16. A. Smith, ‘The Generation Gap Is Deep: Here’s How to Bridge It’, Guardian, 4 September 2017. 17. IPPR, Our Common Wealth: A Citizens’ Wealth Fund for the UK, policy paper, London: Institute for Public Policy Research, March 2018. 18. IPPR, Extending Working Lives: A Devolved Life-course Approach to Establishing Work Beyond State Pension Age, London: Institute for Public Policy Research, 16 May 2018. 19. M. Francese and D. Prady, ‘Universal Basic Income: Debate and Impact Assessment’, IMF Working Paper No. 18/273, 10 December 2018. 20. Email exchange between Miatta Fahnbulleh and the author, May 2020. 21. Email exchange between Paul Johnson and author May 2019. 22. G. Monbiot et al., Land for the Many, London: Labour Party, 2019.


NOTES to pp. 205–232 23. Centre for Social Justice, Ageing Confidently – Supporing an Ageing Workforce, London: Centre for Social Justice, August 2019. 24. ‘Will We Ever Summit the Pensions Mountain?’, Royal London Insurance Research Paper, 16 May 2018. 25. Sajid Javid was appointed Chancellor of the Exchequer by Boris Johnson in July 2019 and resigned from the post on 13 February 2020. 26. Sajid Javid, conversation with the author. 27. Pensions Commission, Pensions: Challenges and Choices, https://www., 2004. 28. Social Mobility Commission, State of the Nation 2016: Social Mobility in Great Britain. Report, November 2016. 29. L.E. Major and S. Machin, Social Mobility and Its Enemies, London: Penguin, 2018. 30. Association of Colleges, ‘The UK’s Success Post-Brexit Relies on “a New Social Contract” and the Delivery of a World-class Technical and Professional Education System’, 22 January 2019, E2%80%99s-success-post-brexit-relies-%E2%80%9C-new-social-contract %E2%80%9D-and-the-delivery-world-class-technical.

8  Governance: Taking Back Control!  1. The Economist, cover, 1–7 June 2019.   2. The French referendum on a Constitution for Europe was rejected by 55 per cent of those who voted on 29 May 2005. Most of the rejected constitution was subsequently incorporated into the Lisbon Treaty, which then won a parliamentary majority.   3. ‘Tusk Warns of “Special Place in Hell” for Those Who Backed Brexit Without a Deal’, Guardian, 6 February 2019.  4. J. Rutter, ‘How Brexit Has Battered Our Reputation for Government’, Guardian, 27 December 2019.   5. International Civil Service Effectiveness (InCiSE) Index, Blavatnik School of Government, Oxford University, 2019.  6. The Civil Service after Brexit: Lessons from the Article 50 Period, London: Institute of Government, 13 May 2020.   7. Construction firm Carillion collapsed in January 2018 and Thomas Cook became insolvent in September 2019. Major scandals included a row over directors’ pay at Persimmon in 2018, an accounting fraud at Patisserie Valerie in 2019 and the closure of the Woodford investment fund empire in June 2019.  8. The Brexit Effect: How Government Has Changed Since the EU Referendum, London: Institute for Government, 29 March 2019.  9. V. Bogdanor, Beyond Brexit: Towards a British Constitution, London: I.B. Tauris, 2019. 10. Chancellor of the Exchequer, 2010–16. 11. W. Woodward and L. Elliott, ‘From Britishness to Blair: The Brown Vision’, Guardian, 10 May 2006. 12. Permanent Secretary to the HM Treasury, 2006–15. 13. C. Bennett, ‘As Statues of Slave Traders Are Torn Down, Their Heirs Sit Untouched in the Lords’, Observer, 14 June 2020. 14. P.G. Richards, Patronage in British Politics, London: Allen & Unwin, 1963.


NOTES to pp. 23 4–260 15. ‘Superforecaster’ is a term initiated by US intelligence agencies. It refers to a person who is exceptionally skilled at assigning realistic probabilities to possible outcomes, even on topics outside their primary subject-matter training. 16. ‘DFID Merger with Foreign Office Draws Ire of Blair and Cameron’, Financial Times, 17 June 2020. 17. G. Freeman, Britain beyond Brexit: A Collection of Essays, London: Centre for Policy Studies, June 2019. 18. A.G. Haldane, Chair of the Industrial Strategy Council, Speech at St James’ Park, Newcastle, 24 September 2019. 19. The UK government controls a 62.4 per cent stake in Royal Bank of Scotland, a relic of the rescue conducted during the financial crisis. 20. W. Hutton, The State We’re In, London: Random House, 1995. 21. Cadbury Report, The Financial Aspects of Corporate Governance, London: Committee on the Financial Aspects of Corporate Governance, December 1992. 22. Greenbury Report, Directors’ Remuneration, 1995, greenbury-report-study-group-directors-remuneration (accessed 30 June 2020). 23. Hampel Report, Committee on Corporate Governance: Final Report, London: Gee & Co., January 1998. 24. ‘Vince Cable Announces Summit to Reshape Corporate Culture in Big Business’, Press Release, Department of Business, Innovation and Skills, 9 March 2015. 25. ‘Wates Principles to Improve Corporate Governance’, Financial Reporting Council, 10 December 2018. 26. ‘The Old Girls Network’, The Economist, 17 February 2018. 27. A. Francke, chief executive of Chartered Institute of Management, interview with the author, 2019. 28. Lord (Mervyn) Davies, Women on Boards: 5 Year Summary, London: Department for Business Innovation and Skills, October 2015. 29. S. Vinnicombe, E. Doldor and R. Sealy, The Female FTSE Board Report 2018, Bedford: Cranfield University. 30. Independent Review of the Financial Reporting Council (FRC): Final Report, London: HMSO, December 2018. 31. Competition and Markets Authority, Statutory Audit Services Market Study: Final Report, London: CMA, 18 April 2019. 32. Sir D. Brydon, The Quality and Effectiveness of Audit: Independent Review, December 2019. 33. ‘Carbonomics. The Green Engine of Economic Recovery’, Goldman Sachs Equity Research, 16 June 2020.

9  Infrastructure: Trains, Phones and Planes   1. S. Heffer, High Minds: The Victorians and the Birth of Modern Britain, London: Random House, 2013.  2. Sajid Javid briefing with the travelling press at the IMF in Washington, 17 October 2019.  3. G. Gopinath, ‘The World Economy: Synchronized Slowdown, Precarious Outlook’, IMF Blog 1555, 15 October 2019.   4. J. Holland-Kaye, ‘Failing to Build a Third Runway Won’t Help the Climate. But It Will Make Us Little Britain not Global Britain’, Mail on Sunday, 1 March 2020.   5. J. Porritt, Blog, 15 October 2015,


NOTES to pp. 262–287  6. ‘Birmingham Leads Surge in Regional Serviced Office Take-up’, Property Week, 30 August 2019.  7. S. Penfold, ‘HS2 Boss Says Route Will Bring 500,000 Jobs and 90,000 New Homes’, Express & Star, 7 November 2018.   8. ‘BT Suspends Dividend and Expands Fibre Network’, The Times, 7 May 2020.  9. Sharon White announced she would be leaving Ofcom in June 2019. In February 2020 she began a new role as chair of John Lewis Partners. 10. Sharon White, interview with the author, November 2018. 11. J. Curtis, ‘BT Boss Philip Jansen Says Full-fibre Rollout Should Be “Top Priority” for Next Government’, City A.M., 31 October 2019. 12. 5G is the fifth generation of the technology used to deliver the mobile internet to get online. 13. ‘5G Controversy: Boris Johnson Faces Backlash from the US and Some Senior Tories over Huawei’, The Times, 28 January 2020. 14. ‘Trump Attacked Boris Johnson over Huawei in a Heated Phone Call’, Bloomberg, 7 February 2020. 15. ‘Chinese Parliament Approves Controversial Hong Kong Security Law’, Guardian, 28 May 2020. 16. Channel 4 News, Fact Check, 25 June 2015. 17. ‘Crossrail. Gleaming Stations So Why No Trains Until 2021?’, Guardian, 27 December 2019. 18. Ibid. 19. Interview with the author, July 2019. 20. Professor Roderick Smith, ‘On the Wrong Lines’, Mail on Sunday, 29 December 2019. 21. ‘ “Northern Could Lose Rail Franchise”, Says Grant Shapps’, BBC Business website, 2 January 2019. 22. R. Sunak, Free Ports Opportunity, London: Centre for Policy Studies, November 2016. 23. Q. Slobodian, ‘Rishi Sunak’s Free Ports Plan Reinvents Thatcherism for the Johnson Era’, Guardian, 1 March 2020. 24. A. Brummer, Britain for Sale, London: Random House Business Books, 2012. 25. Ibid. 26. Ibid. 27. Ibid. 28. Interview with the author, July 2019. 29. A contract for differences is an arrangement made in financial derivatives trading where the differences in the settlement between the open and closing trade prices are cash settled. 30. Electric car market statistics, November 2019, 31. P. Campbell and N. Thomas, ‘Motorway Services Chiefs Fear Power Grid Not Fit for Electric Car Revolution’, Financial Times, 20 January 2020. 32. ‘Box 1.1 The Global Automobile Industry’, in World Economic Outlook, IMF, October 2019. 33. National Infrastructure Commission, National Infrastructure Assessment, UK, July 2018.

10  Heritage: Back to the Future   1. Centre for Economics and Business Research (CEBR) Consultancy, World Economic League Table 2020, London, 26 December 2019.


NOTES to pp. 287–317  2. Labour proposed taking the railway franchises, water companies, energy firms, the Royal Mail and Openreach (the distribution arm of BT) into public ownership.   3. D. Reynolds, Island Stories: Britain and Its History in the Age of Brexit, London: William Collins, 2019.  4. ‘London Protests Live: Six Police Officers Injured in Far-right Protests as PM Condemns “Racist Thuggery” ’, Telegraph, 13 June 2020.   5. ‘Cambridge University Launches Inquiry into Historical Links to Slavery’, News, University of Cambridge, 30 April 2019, cambridge-university-launches-inquiry-into-historical-links-to-slavery (accessed 30 June 2020).  6. S. Jenkins, A Short History of London: The Creation of a World Capital, London: Viking, 2019.   7. Department for International Development, Final Aid Spend 2017, November 2018.  8. ‘Prime Minister Announces Merger of Department for International Development and Foreign Office’, Press Release, Prime Minister’s Office, 16 June 2020.   9. ‘Unilever Back in Political Spotlight over UK Return’, Financial Times, 11 June 2020. 10. J. Cowley, ‘Editor’s Note: The Great Railways Debacle’, New Statesman, 14–20 February 2020.

11  Onwards and Upwards   1. Andrew Bailey replaced Mark Carney as governor of the Bank of England on 16 March 2020. He was chief executive of the Financial Conduct Authority from 2016 to 2020. He had previously been deputy governor of the Bank of England from 2013 to 2016, where he had been responsible for the Bank’s enforcement arm, the Prudential Regulatory Authority.  2. ‘BOE’s Bailey Says “Financial Markets Were Bordering on Disorderly in Recent Days” ’, Reuters, 19 March 2020.   3. Andrew Hauser, ‘Seven Moments in Spring: Covid-19, Financial Markets and the Bank of England’s Balance Sheet Operations’, Speech at Bloomberg, London, 4 June 2020.  4. Employment in the UK, December 2019, ONS.   5. ‘Migration and Fiscal Sustainability’, Box 3.4 in Fiscal Sustainability Report, Office for Budget Responsibility, July 2014, p. 101, migration-and-fiscal-sustainability/ (accessed 30 June 2020).   6. ‘Broadband Networks Stand Firm During Pandemic’, Ofcom Media Office, 13 May 2020.   7. ‘Investment in Britain’s Tech Sector Jumped 44 Per Cent in 2019’, Reuters, 15 January 2020.   8. ‘US Tech Demonstrates Resilience as Startups Navigate Virus Crisis’, Tech Nation, 10 June 2020.   9. J. Campbell, ‘Belfast Harbour Film Studios Set for £45m Expansion’, BBC website, 17 February 2020. 10. J. Stiglitz, ‘Facebook Does Not Understand the Marketplace of Ideas’, Financial Times, 18 January 2020.



Anderson, C., Makers: The New Industrial Revolution, London: Random House Business Books, 2012. Banerjee, A.V. and Duflo, E., Good Economics for Hard Times: Better Answers to Our Biggest Problems, London: Allen Lane, 2019. Brummer, A., Britain for Sale: British Companies in Foreign Hands – The Hidden Threat to Our Economy, London: Random House Business Books, 2012. Cameron, D., For the Record, London: William Collins, 2019. Davis, E. Made in Britain: How the Nation Earns Its Living, London: Little Brown Books, 2011. Department for Business, Energy and Industrial Strategy, Industrial Strategy: Building a Britain Fit for the Future, Report, London, 2017. Digital Competition Expert Panel, Unlocking Digital Competition, Report, London: HM Treasury, 2019. Galbraith, J.K., The Great Crash 1929, London: Allen Lane, Reissued 2007. Haldane, A.G., ‘Industrial Strategy’, Speech, St. James’ Park, Newcastle; 24 September 2019. Haskel, J. and Westlake, S., Capitalism without Capital: The Rise of the Intangible Economy, Oxford: Princeton University Press, 2018. Heffer, S., High Minds: The Victorians and the Birth of Modern Britain, London: Random House, 2013. Hutton, W., The State We’re In, London: Random House, 1995. Institute of Public Policy Research, Prosperity and Justice: A Plan for the New Economy – The Final Reports of the IPPR Commission on Economic Justice, Cambridge: Polity, 2018. Jenkins, S., A Short History of London: The Creation of a World Capital, London: Viking, 2019. Keegan, W., Mr. Osborne’s Economic Experiment: Austerity 1945-51 and 2010–, Milton Keynes: Searching Finance, 2014. Liddle, R., The Great Britain Betrayal: The True Story of Brexit, London: Constable, 2019. Mazzucato, M., The Value of Everything: Making and Taking in the Global Economy, London: Allen Lane, 2018. Minsky, H.P., Stabilizing an Unstable Economy, New York: McGraw Hill, 2008. National Infrastructure Commission, National Infrastructure Assessment, Report, July 2018. Rosenberg, D., Israel’s Technology Economy: Origins and Impact, Cham, Switzerland: Palgrave Macmillan, 2018. Rowan, D., Non-Bullshit Innovation: Radical Ideas from the World’s Smartest Minds, London: Bantam Press, 2019.


SELEC T BIBLIOGRAPHY Shipman, T., All Out War: The Full Story of How Brexit Sank Britain’s Political Class, London: William Collins, 2016. Stiglitz, J.E., The Euro and Its Threat to the Future of Europe, London: Allen Lane, 2016. Taaffe, O. (ed.), Banking on Change: The Development and Future of Financial Services, Chichester: John Wiley & Sons, 2019.



3D printing technology, 104–5 3G Capital, 301 5G mobile networks, 5, 13, 30, 119, 266–7, 314 academies, 83–4 Activision Blizzard, 128 Adele (singer), 3, 137–8 Adjaye, David, 141 Advent & Bain (private equity firm), 158, 296–7 aerospace industry, 4, 113–16 Airbnb, 20 Airbus, 15, 54, 116 aircraft technology, 274 airports, 259–60, 273–4 see also Heathrow Allianz, 184 Allison, Graham, 29 Alphabet (company), 99 AlphaGo (program), 124–5 Alsop, Will, 141 Alternative für Deutschland (AfD), x, 27, 34, 310 Alternative Investment Market (AIM), 170 Altmann, Baroness Ros, 206 Amazon, 57, 102, 120, 130, 146, 311 A’Mhoine, Sutherland, 114 Amsterdam Schipol airport, 273 Amtek, 107 Andover, Hampshire, 103 Angels & Berman, 144 Anglo-Saxon economic model, 19–20, 22, 41, 68, 184, 317 Ant Financial, 179 Apple (company), 7, 28, 57, 129, 140, 298–9, 311 Apple Records, 136 apprenticeships, 85–7, 202

Archers, The (radio programme), 124, 209 architecture, 140–2 Arm Holdings, 16, 72, 109, 299, 316 Armitt, Sir John, 270, 272, 277, 278, 283 art schools, 142, 144 Arthur, Sir Michael, 113 Artificial Intelligence (AI), 19, 57, 90, 102–4, 119, 124–5, 128 Arts Council England (ACE), 156 arts education, 129, 153 arts funding, 156 Asahi (company), 298 ASEAN Free Trade Area (AFTA), 58 Asian Infrastructure Investment Bank (AIIB), 13 AskoNobel (company), 20–1 ASOS, 143 Asset Management, 247 Associated British Ports, 275 Aston Martin, 99 AstraZeneca (pharmaceutical company), 10, 12, 54, 65–8, 72, 73–6, 235, 242, 249, 289, 297, 302 Atom (internet bank), 160, 185 Audit, Reporting and Governance Authority, 251 audit industry, 251–2 austerity measures, ix, 17, 189, 195, 283 Australia, 47, 252, 281, 290 Austria, 35 auto-enrolment schemes, 207–8 automotive industry, 97–8, 163, 279–80 see also electric vehicles (EVs) avionics, 19 Babcock (company), 296 baby boomers, 188, 196


INDEX BAE Systems, 15, 86 Bagehot, Walter, 221 Baidu (company), 98 Bailey, Andrew, 168–9, 180, 307 Bailey, Christopher, 144 Balls, Ed, 166, 167 Banister, Scott, 126 Bank for International Settlements, 173 Bank of Credit and Commerce International (BCCI), 243 Bank of England, 161, 165, 166–9, 178, 179, 180, 257–8, 307 banker bonuses, 165 see also remuneration Barclays, 180 Bartholomew, James, 39–40 Bazalgette sewerage system, 256 BBC, 131–2, 151, 154, 188 Beatles, The, 136, 155 Beckham, David, 145 Beckham, Victoria, 145 Belt and Road Initiative (BRI), 13 Berners-Lee, Tim, 311 ‘Better Jobs Deal’, 203, 218 Beveridge Report (1942), 194 Bezos, Jeff, 130 Bickerton, Chris, 196 Birkett, Peter, 79, 80 Birmingham, 237, 261 Bizzle, Lethal, 138 Black Lives Matter movement, 190, 288 Black Rock (company), 247, 253 Black Wednesday (1992), 194–5 Blackhall Studios, 131 Blair, Tony, 11, 17, 83, 195, 221, 241, 295 Blake, Andrew, 102 Bloomberg, 164 Blyth, Northumberland, 112 BMW Group, 6, 298 Boeing HorizonX Ventures, 113 Bogdanor, Vernon, 226 Bombardier (company), 235 bond trading, 170–1 Boohoo (company), 121 Boots the Chemist, 10 Brabham (racing team), 149 Brazil, 9, 47 Brexit Party, 18, 39, 233

BRICS (Brazil, Russia, India, China and South Africa) economies, 47, 170 BrightHouse (company), 250 Bristol, 237 BRIT School for Performing Arts and Technology, 137, 139 Britain’s Got Talent (TV show), 137 British Bankers Association, 178 British Film Institute, 151 British Grand Prix, 148 British Investment Bank, 240, 316 British Nuclear Fuels, 99 British society, divisions in, 187–90 British Telecom (BT), 21, 263–5, 266 broadband connection, 5, 21, 263–5, 314 Broadbent, Ben, 36, 102 Brown, Gordon, 11, 17, 41, 166, 167, 168, 174, 204, 228, 295 Brummer, Michael, 286–7 Brunel, Isambard Kingdom, 256 Brydon, Sir Donald, 251–2 Buffett, Warren, 299 Burberry (company), 13, 143–4, 289, 304 Burnham, Andy, 237 Butterfield, Stuart, 122 Cable, Sir Vince, 183, 246 Cadbury (company), 10, 298, 301 Cadbury, Sir Adrian, 243 Callaghan, James, 68, 194 Cambridge, 66–8, 69, 74–6 Cambridge Antibody Technology (CAT), 72 Cambridge University, 70, 71–3, 125, 141, 290 Cameron, David, xi, 44, 45, 87, 89, 163, 195, 221, 232, 295, 302 Campos, Nauro, 39 Cancer UK, 77 Candy Crush Saga, 128–9 Capital Economics, 26 car manufacturing, 30–1, 43, 279–80 see also automotive industry; electric vehicles (EVs) carbon reduction targets, 253 Cardiff, 256 Carey, Chase, 150 Carillion (company), 250


INDEX Carluccio (restaurants), 250 Carney, Mark, 31, 41, 45–6, 167–8, 182–3, 185, 252, 278, 289, 307–8 Carvel, Bertie, 124 Cass Business School, 50, 55 Catalonia, 229 Catapult project, 89, 93 Caulfield, Mark, 73 Central St Martin’s School of Art and Design, 144 Centre for Social Justice, 205 Centre for the Study of Financial Innovation, 25 CereProc (company), 104 Chadwick, Edwin, 256 Chartered Institute of Management, 247–8 China: Covid-19 pandemic, 27; economic rise of, 3, 27, 47; financial technology, 179; and innovation, 75; and the internet, 311; science research, 94; shipping, 276; trade relations with US, 29, 30, 266–7; UK trade with, 13–14, 289 China Investment Corporation (CIC), 13 Chipmunk (rapper), 138 Churchill, Winston, 285, 290 Citizens’ Wealth Fund, 199 City of London, xi, 3–4, 11, 19, 30, 37, 159, 161–2, 165, 166, 173–7, 247, 252, 293, 294, 312, 318 CityFibre, 264 Civil service, 32, 223–6, 234, 235–6, 236, 309, 312–13 Clark, Greg, 107, 114, 251 Clarkson, Jeremy, 131 Clegg, Nick, 232 Clifton suspension bridge, 256 climate change, 183, 252–3, 258, 274, 278–82 Cloud services, 57 CMR Surgical, 104 Cobham (company), 12, 114, 296–7, 302 Collaborative Research & Development funding, 93 Comcast, 130, 316 Common Market, 34, 47 Commons expenses scandal (2009), 218

Commonwealth, 47, 63, 290 Competition and Markets Authority, 251, 303 Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), 236–7 comprehensive schools, 83 Confederation of British Industry (CBI), 9, 163 Connor, Roger, 66 constitution, British, 221–2, 223, 226, 228 Corbyn, Jeremy, 50, 190, 214, 220, 230, 240, 255, 282, 287 Corn Laws, repeal of (1846), 1 corporate governance, 242–54 Cosco (shipping company), 276 Covid-19 pandemic: and the arts, 123, 156–7; and the banks, 161–2, 169; and climate change, 259; economic fallout, ix–x, 4, 29–30, 250, 306–7, 319; fiscal policies, 23; furlough scheme, 38, 224; and global growth, 43; and inequality, 188; socio-economic measures, 194; unemployment, 86; vaccine, 10, 64, 65–6 Cowell, Simon, 137 Cowley, Jason, 303 CQS (asset management), 164 creative industries, xi, 3, 17, 19, 53, 55, 81, 123–57 Creative Industries Federation, 127, 129, 151 credit card payments, 48 Crick, Francis, 77 Crick Institute, 77, 93 Crosland, Anthony, 82 Crossrail, 22, 268–9, 272 Crown, The (Netflix drama), 132–3, 292 Culver Studios, 130 Cummings, Dominic, 220, 223, 234, 309 Customs Union, 56, 59, 228 CVC Capital Partners, 149 cyber currencies, 177–8 cybersecurity, 19, 116–19, 161, 177 Dacre, James, 156 Darktrace (company), 119 Darling, Alistair, 45


INDEX Davies, Sir Mervyn, 248 Davos World Economic forum, 252 DeepMind (company), 102, 120, 125, 126, 127–8, 152 Deloitte, 252 Delta Topco (company), 149 Democratic Unionist Party (DUP), 228 Denmark, 35 Department for Digital, Culture, Media & Sport (DCMS), 139 Department for Exiting the EU (DexEU), 236 Department for International Development, 235, 295 Department for International Trade, 236 Desai, Samir, 179 design and architecture, 140 Design Musem, 140 Deutsche Bahn, 21 Deutsche Börse, 12, 170 Devarajan, Shantayanan, 32, 58–9 devolution, 221–2, 226–8, 239–40 Diageo (company), 13, 32, 235, 249 Diamond Light Source particle accelerator, 93 Digital Bridge, 110 Digital Catapult, 109, 110 digital disruption, 20, 55, 127, 129, 136, 146 Dimon, Jamie, 312 Dingemans, Simon, 252 driverless cars, 97–9 drone technology, 115–16 Du Plessis, Jan, 264 Dubai Ports World, 275 Duffy, Michael, 200 Dulux paint brand, 20–1 Duncan-Smith, Iain, 205 Dunleavy, Ivan, 134 Dupree, James, 104 Dyson, James, 88–9, 92, 98 Dyson Institute of Engineering and Technology, 88 East, Warren, 86 EasyJet, 249 Ecclestone, Bernie, 147–8, 149–50 Economist, The (magazine), 221 Economist Intelligence Unit (EIU), 61

Economists for Brexit, 42 EDF (Electricité de France), 99, 111, 260, 260–1, 283 Education, Department for, 82 education funding, 82, 87–8, 92, 94–5 education system, 81–7, 152, 217 electric vehicles (EVs), 31, 88–9, 90, 98, 261, 279–81 electronic payments systems, 49 Elliott Management, 164 Elstree studios, 131, 135, 316 EMI (record company), 136, 139, 155 energy companies, 6 energy supply, 110–13, 260–1, 277–8 English baccalaureate (EBacc), 152–3 English language, 291 English Premier League (EPL), 145–7 Environmental, Social and Governance (ESG) investing, 253 EU referendum campaign, viii, ix, 26–7, 35, 61, 89, 154, 163, 187, 196, 220–1, 242, 310 EU Renewable Energy Directive, 110 Euribor interest rates, 174, 178 euro crisis (2010), x, 40, 163 European Central Bank (ECB), 34, 166 European Coal and Steel Community, 33 European Commission, 1, 12, 35 European Community (EC), 33 European Court of Justice (ECJ), 41 European Economic Community (EEC), 2, 36–7, 288 European Monetary System, xi, 174 European Space Agency, 73, 115 European Union (EU): and Brexit, 312; and Covid-19, 34–5; development of, 33–4; and devolution, 229; freedom of movement, 85; Galileo project, 117 eurozone, x, xi, 11, 12, 40, 46, 163 Evi Technologies, 102 Exchange Rate Mechanism (ERM), 37, 194, 285 Extinction Rebellion (2019), 111, 183, 252, 279, 314 EY (audit firm), 252 FAANG corporations (Facebook, Amazon, Apple, Netflix, Google), 48, 127, 129, 315


INDEX Facebook, 57, 126 Fahnbulleh, Miatta, 201 Fairburn, Jeff, 244–5 Falconer, Crawford, 236 Falklands War, 297 FanDuel (company), 121 Farage, Nigel, 18, 233 fashion, 142–4 Felixstowe, UK, 48, 274, 276 Fevertree (soft drinks innovator), 303 Fibercore (company), 80 Fidelity International Information Services (FIIS), 160 Fidelity National Information Service, 158 Fidesz party (Hungary), xi, 189, 310 FIFA, 252 film industry, 127, 130–1, 133–5, 156 Financial Conduct Authority (FCA), 180 financial crisis (2007-09), 3–4, 11, 19, 20, 41, 51, 158, 161, 167, 195, 198 Financial Reporting Council, 243, 245, 250 financial services, 19, 37–8, 40, 51, 158–86 Financial Services Authority, 167, 168 Financial Stability Board, 41, 161, 167, 168 financial technology (fintech), 19, 49, 55, 125, 158–61, 170, 174–82 Financial Times, 42 Fink, Larry, 253 Finland, 200 Five Star movement (Italy), x, 28 Fixed Term Parliament Act (2011), 222 flooding, 281–2 Floyd, George, 288, 290 Flybe, 250 food banks, ix, 17, 190 football, 145–7 Forbes (magazine), 119 foreign aid, 229, 235, 294–5 Foreign and Commonwealth Office, 235, 295 foreign currency trading, 173 Formula 1 motor racing, 147–50 Foster, Arlene, 228 Foster, Norman, 140 Founders Fund, 126

Fox, Liam, 59–60, 236 fracking, 277 Framestore (company), 53 France, 27, 34, 273 Francke, Anne, 247–8 Frankopan, Peter, 60 free schools, 84 free trade, 56–8 freedom of movement, 61, 85, 293 Freeman, George, 238 French bankers, in the UK, 175 Friedman, Milton, 200 Friedman, Sonia, 123 Friends (comedy), 132 FTSE 100 Index, 11–12, 67, 246, 249 FTSE 250, 12 Fuller’s (brewery), 298 Funding Circle, 160, 179 Future Cities Catapult, 109 Future Fund, 52, 93 future technologies, 8 Futurebrand (company), 53 G7 countries, xi, 294 G20 countries, 41, 167, 179 Galileo project, 117 Game of Thrones (TV series), 135–6, 316 gaming industry, 19, 124, 127–9 Gaulle, Charles de, 33 GDP (gross domestic product), 2, 42, 46, 63, 123, 143, 163, 170, 175 GEC (company), 266 gender imbalance, in corporate life, 246–50 gender pay gap, 190, 250 gene sequencing project, 69, 73 General Data Protection Regulation (GDPR), 28–9 General election (2019), 9, 220, 230, 240, 255, 287, 305 Genomics England, 73 George, Eddie, 307 German car industry, 13 Germany, xi, 15, 34, 35, 87, 99, 111, 216, 273 Gieves & Hawkes, 144 ‘gig economy’, 50, 201–2 Giles, Chris, 42 gilets jaunes (France), 27, 34 GKN Driveline, 105–6, 280


INDEX Glastonbury (festival), 137 GlaxoSmithKline (GSK), 12, 54, 65–6, 73–4, 289 globalisation, 18, 27, 47–51 Glorious Revolution (1688), 1 GNSS Agency, 117 Golden Dawn (Greece), x Goldman Sachs, 173, 251, 253 Goodwin, Fred, 158 Google, 77, 124–5, 126, 174, 181 Goonhilly Down, Cornwall, 114 Gopinath, Gita, 258 Gove, Michael, 84, 152 Grade, Michael, 134 grammar schools, 82–3 Grand Theft Auto, 128 Grayling, Chris, 119, 261 Grech, Gerard, 120 Greece, x, 27, 163, 197 green finance, 182–4 green infrastructure, 253 Green Investment Bank (GIB), 183–4, 314 Green Party, 233 green revolution, 43 green technologies, 111, 280–1, 283 Greenbury, Sir Richard, 243–4 Greening, Justine, 261, 295 Gregory, Ruth, 26 grime artists, 137–9 Gupta, Sanjeev, 107 Hadid, Zaha, 53, 141 Haldane, Andy, 6, 7, 51–2, 238–9 Hall, Tony, 151 Hamleys (retailer), 12 Hammond, Philip, 63, 118 Hammond, Richard, 131 Hampel, Sir Ronald, 245 Hanson, Lord, 74 Haskel, Jonathan, 181 Hassabis, Demis, 125 Hatfield, Hertfordshire, 103 Hauser, Andrew, 307 Hawking, Stephen, 92 Healey, Denis, 194 Heath, Edward, 33, 161, 193, 317 Heatherwick, Thomas, 53 Heathrow Airport, third runway, 258–60, 273–4 hedge funds, 164–5

heritage brands, 298 Heseltine, Michael, 256 Hester, Stephen, 158 Hewlett Packard, 48 Highlands and Islands Enterprise, 114 Hill, Shirley, 182 Hill, Vernon, 182 Hilton, Andrew, 25 Hinkley Point power station, 258, 260–1 Hintze, Sir Michael, 164 HMRC, 224 Hobbes, Thomas, 193 Hockney, David, 151 Hollande, François, 175 Holland-Kaye, John, 260 home ownership, 203–4, 208–11 homelessness, ix, 17 Honda, 31 Hong Kong, 14, 29, 289 Hong Kong airport, 267 Horizons Ventures, 126 hospitality industry, viii–ix, 4 House of Fraser, 12, 250 House of Lords reform, 231–3, 240 Howe, Geoffrey, 38 HS2 (high-speed rail link), 6, 22, 238, 258, 261–2, 269–72 HS3 (high-speed rail link), 238 HSBC Bank, 173, 174, 249 HSBC Kinetic, 318 Huawei, 13, 30, 179, 266–7 Hut Group (company), 121 Hutchison Port Holdings, 276 Hutton, Will, The State We’re In, 241 Huxley, Aldous, Brave New World, 26 hydrogen, as a fuel, 277–8 Hyperoptic, 264 Iceland, 12 Illumina (company), 69, 73 Imagination Technologies, 298–9 Immerse UK, 110 immigration: points-based system, 94–5, 155; to the UK, viii–ix, 28, 49, 61–3, 287, 310–11 Imperial Chemical Industries (ICI), 10, 21, 74 Imperial College, London, 64, 70, 76, 77, 89, 125 Improbable (company), 110


INDEX income inequality, 190 independent education, 217 India, 47, 289 Industrial and Commercial Bank of China, 184 Industrial Relations Act (1971), 193 Industrial Strategy, 19, 22, 54, 70, 86–7, 90, 181 Industrial Strategy Challenge Fund, 90 Industrial Strategy Council, 6, 239 INEOS (company), 50 inequality, 49–50 information and communications technology (ICT), 48 Inmarsat (company), 114 Innovate UK, 93 Institute for Fiscal Studies, 15, 198, 203 Institute for Government (IfG), 223, 224, 225, 227, 230 Institute for Innovation and Public Purpose, UCL, 53 Institute for New Economic Thinking, 39 Institute for Public Policy Research (IPPR), 199 insurance market, 171–2, 183 intellectual property, 129, 136, 139, 152, 153, 155, 266–7, 297 interconnectors, 112–13 interest rates, 257–8 intergenerational divide, 191, 195–201, 203–6 International Data Corporation, 110 International Development Association, 295 International Monetary Fund (IMF), xi, 29, 41, 42, 43, 68, 178, 192, 194, 258, 278 internet banks, 185 Internet of Things (IoT), 109, 125 Invensys (company), 12 investment, in the UK, 92 investment in infrastructure, 257–8, 267 IPOs (initial public offerings), 55, 170 Iraq invasion (2003), 218 Ireland, 112, 141, 187, 222, 226–8, 227 see also Northern Ireland Irish border question, 226–8, 228, 312 iShares, 184

Israel, 47, 126 Italy, x, 27, 28 Ive, Jonathan Paul, 140 J.P. Morgan, 164, 247, 312 Jackson Life, 172 Jaguar Land Rover, 54, 98, 140, 289 James Bond films, 133, 135 ‘JAMs’ (just about managing middle classes), 190 Jansen, Philip, 159, 263, 265 Japan, 31, 34, 271, 298 Javid, Sajid, 59, 168, 210, 234, 257 Jenkins, Simon, A Short History of London, 294 Jessie J (singer), 137 Jobbik (Hungary), x, 310 Johns, Capt. W.E., Biggles books, 297 Johnson, Boris: apprenticeship system, 86; becomes Prime Minister, 54, 60, 230; and big infrastructure, 267–8; cabinet reshuffle, 234; election campaign, 240; and ‘Global Britain’, 311; illegally prorogues Parliament, 223; and Irish border question, 226–7, 228; as mayor of London, 293; merges Department for International Development with Foreign and Commonwealth Office, 235, 295; and the North of England, 121, 237; points-based immigration system, 94; and social care, 214 Johnson, Jo, 90 Johnson, Paul, 15, 202 Johnson Matthey, 315 Jones, Andrew, 50, 55–6, 57 Jones, Eddie, 289 Jones, Stephen, 178, 180 Jope, Alan, 300 JSS (company), 184 Just Eat (company), 20 just-in-time manufacturing, 48, 57, 105, 163 Kalifa, Ron, 158–60, 179 Kampfner, John, 127, 129, 140, 153 Kengeter, Carsten, 170 Kennedy, John F., 171 Kent, University of, 18 King (games company), 128 King, Mervyn, 167


INDEX Kingman, Sir John, 250–1 King’s College, London, 77 Knowledge Transfer Partnerships, 93 Kornberg, Sir Hans, 7 KPMG, 179, 252 Kraft Heinz, 241, 299, 300–2 Labour Party, 100, 190, 203, 210, 214, 230, 237, 240, 241, 263, 278 Lagarde, Christine, 34 Large, John, 79 Lawson, Nigel, 38 Leadsom, Andrea, 114, 296–7 Leamington Spa, 107 Leavesden Studios, 133 Lee Sedol, 124 Lega Nord (Italy), 28 Legg, Shane, 125 Li Ka-Shing, 276 Liberty Media, 149–50 Liberty Vehicle Technologies, 107–8 Libor interest rates, 174, 178 Lifetime Individual Savings Account (LISA), 201 Lipton, David, 192 Liverpool, 256 Lloyd’s of London, 165, 166, 171–2, 182 Lloyds Bank, 235 localism, 237, 239 Locke, John, 193 Loeb, Dan, 172 London: Bazalgette sewerage system, 256; Canary Wharf, 38, 256, 293, 294; Docklands, 256; a global city, 292–4; science research hub, 89; tech hub, 101; see also City of London London City Airport, 273 London Office for Rapid Cybersecurity Advancement (LORCA), 118 London Stock Exchange (LSE), 12, 159, 165–6, 169–71, 179, 184, 185, 243 Loughborough University, 81 Lucas, George, 135 M&G (investment manager), 172 Maçães, Bruno, 60 Machin, Stephen, 217

Macmillan, Harold, 16, 33, 264 Macpherson, Sir Nick, 231 Macquarie (bank), 184, 314 Macron, Emmanuel, 34 Magic Pony (company), 102 Major, Lee Elliot, 217 Malone, John, 149 Manchester, 89, 121, 237 Manchester School of Architecture, 141 Mansfield, Peter, 104 Marconi, 266 Marcus (online bank), 174 Marks & Spencer, 47, 249 Massachusetts Institute of Technology (MIT), 72 Massenet, Natalie Sara, 143 Materials Solutions, 106 Maxwell, Robert, 243 May, James, 131 May, Theresa, 22, 45, 55, 56, 83, 90, 95, 107, 114, 190, 191–2, 214, 227, 228, 230, 300, 302 mayors, 237–8 Mazars (audit company), 251 Mazzucato, Mariana, 53–4, 77 McCall, Carolyn, 249 McCarten, Anthony, 156 McCartney, Stella, 144 McDonnell, John, 200 McEwan, Ross, 289 McGovern, Gerry, 140 McGuinness, Martin, 228 McKinsey (management consultants), 248 McLaren (company), 93, 148, 149 McQueen, Alexander, 143, 144 MediaCityUK, 121 Medical Research Council, 77 MedImmune (company), 67 Meirelles, Fernando, 156 Melrose Industries, 314 Mendes, Sam, 1917 (film), 3 merchant banks, 318 Merkel, Angela, 15, 34 Metro Bank, 182 Microsoft UK, 120 migration, 28 Milburn, Alan, 217 Miliband, Ed, 196 military security, 116 Minford, Patrick, 42–3


INDEX Minimum Income Guarantee, 201 Mirova (company), 184 Mobileye (company), 126 Momentum movement, 190 Monaco, 50 Monarch airline, 250 Monbiot, George, 203–4 Monzo banking, 181 Morgan, Peter, 132 Morgan, Sir James, 262 Mosley, Max, 149 motor manufacturing see automotive industry motor sport, 147–50 ‘Motorsport Valley’, 99, 149, 150 MRI scans, 104 MSD (company), 92 Muddy Waters Research, 164 Murdoch, Rupert, 145 music festivals, 137 Musk, Elon, 126 MVR Global, 110

New Economics Foundation, 201 New Labour, 11, 241 Newmarch, Mick, 296 Newton, Isaac, 92 Nightingale hospitals, 224, 288 Nissan, 31, 163 ‘No deal’ Brexit, 224–5 North Sea Link (NSL), 112 Northern Ireland, 222, 226–8, 259 ‘Northern Powerhouse’, 6, 53, 92, 218, 238 North-South divide, 17, 225, 272 Norway, 111–12, 247 nuclear power, 99, 110–11, 260, 281 Nurse, Paul, 77 Nye, Joseph S., 1, 15

National Crime Agency, 118 National Cyber Security Centre (NCSC), 117 National Cyber Security Strategy, 118 National Employment Savings Trust, 215 National Enterprise, 101 National Foundation for Educational Research (INFER), 85 National Grid, 112 National Health Service (NHS), viii, 4, 62, 190, 211, 212, 224, 288 National Industrial Council, 51 National Infrastructure Commission, 270, 276–7, 279, 282 National Insurance Contributions (NIC), 206 National Security Council, 266 National Theatre, 123, 154 nationalist movements, 18, 28, 221–2, 229 Neil, Andrew, 83 Netflix, 132–3, 146, 156, 292 Netherlands, 35, 112, 158, 247, 300 Network International, 160 Network Rail, 273 Neville, Amanda, 151 New Conservatism, 238

O2 (company), 266 Oakervee, Douglas, 268 Obama, Barack, 13 Ocado, 20, 103–4 Occupy Movement, 189 Office for National Statistics (ONS), 190 OMA (architects), 140 O’Neill, Jim, 47 O’Neill, Michelle, 228 Online Trust Alliance (OTA), 117 Open Reach (BT), 263, 265 Open Univeristy, 99 Orbán, Victor, 189 Organisation for Economic Co-operation and Development (OECD), 29, 50, 84, 243 Osborne, George, xi, 6, 13, 40–1, 44, 53, 56, 92, 135, 164–5, 201, 227, 238, 260, 302 overseas ownership, 6, 9–10, 21, 160, 242, 275, 297–304, 316 Oxbotica, 98 Oxford Robotics Institute, 98 Oxford University, 10, 64, 65, 70–1, 125 Oxford University International Civil Service Effectiveness (InCeSE) Index, 224 P&O ports, 275–6 Pangalos, Menelas, 67–8 Parliament, 221–2, 223, 226, 230, 231 parliamentary sovereignty, 226 Parlophone (record company), 136


INDEX party system in government, 233–4 Parvest (company), 184 Patel, Priti, 61, 234 Patisserie Valerie, 250 Patterson, Gavin, 265 Pawson, John, 140 PayPal, 126, 177 Pearson Business School, 18 Pearson Group, 18 pension schemes, 188, 204–8 Pensions Commission, 206–7 People’s Vote campaign, 222 Persimmon, 244–5 Peru, 47 Peterbrook (company), 278 Pfizer (company), 66–7, 242 Piketty, Thomas, Capital in the Twenty-First Century, 50 Pinewood Studios, 133, 134 Pinewood Studios Group, 134–5 Piraeus, Greece, 276 PISA tests, 84–5 Plaid Cymru, 227 political disenchantment, 218 Polly Peck (company), 243 Polman, Paul, 9, 109, 302 Pompidou, Georges, 33 popular music, 136–9 populism, 28, 189 Porritt, Jonathan, 260 Portsmouth University, 81 Portugal, 60 Primark, 304 private equity firms, 10, 11, 106, 149, 155, 159, 165, 296, 299, 314, 317 privatisation of public utilities, 38–9 productivity, 4, 102, 257 ‘Project Fear’, 44 property tax, 210 Protestant ethic, 1 Prudential Insurance, 172, 296 Prudential Regulatory Authority (PRA), 161 Public Health England, 4, 224 public infrastructure, 255–84, 256 Putin, Vladimir, 125 PwC, 110, 252 Qiagen (company), 92 Quant, Mary, 142 quantitative easing, 45, 307

R&D (research and development), 7 rail franchises, 21 railway infrastructure, 261–2, 269–73 see also HS2 (high-speed rail link) Ramsden, Dave, 179 Rand, Ayn, 20 Rank Group, 134 Rascal, Dizzee, 138 Rassemblement National, 310 Ratcliffe, Jim, 50 Reaction Engines (company), 113 Read, Ian, 66, 242 Real Time Gross Settlement System (RTGS), 179 Reckitt Benckiser, 12 regional governance, 237, 239–40 regulation, of utilities, 6 regulation, economic, 21 regulation, financial, 167–9, 171, 180, 185 remuneration, 11, 40, 243–6, 252 renewable energy, 110–11, 277–80 rental property, 210–11 reputation of UK abroad, 53, 68, 92, 140, 221–3, 284 Research & Development (R&D), 54, 56, 70, 71, 90 research universities, xi, 6–7, 17, 69–81, 125 reshoring, 107–8 Resolution Foundation, 190, 195, 197, 201, 207, 209, 218 retail industry, 4 Reynolds, David, Island Stories, 287 Richards, Peter, 232 Ridley, Matt, 102 Rio Tinto (company), 47 Robbins, Olly, 223 Roberts, Brian, 130 robotics, 103–4 Rockstar Games, 128 Rogers, Richard, 3, 140, 171 Rolls Royce, 32, 86, 113, 116, 249, 261, 274, 281, 314 Romeo, Antonia, 236 Ronaldo, Christian (footballer), 145, 171 Rose, Alison, 249 Rosenfeld, Irene, 301 Rousseau, Jean-Jacques, 193


INDEX Rowling, J.K., Harry Potter books and films, 3, 19, 133–4, 151 Royal Ballet, 124 Royal Bank of Scotland (RBS), 158, 159, 179, 235, 240, 249, 289 Royal Berkshire Hospital, 212 Royal College of Art, 140, 144 Royal family, 288, 291–2 Royal Institute of British Architects (RIBA), 141, 142 Royal Opera House, 151 Rudd, Roland, 222 Russell Group universities, 78, 85, 125 Russia, 47 Rutherford, Ernest, 90 Rutherford Fund, 90 Rutnam, Sir Philip, 234 Rutter, Jill, 223 Sabadell (bank), 180 Sabisky, Andrew, 234 Sainsbury’s, 249 Salvini, Matteo, 28 Samsung, 102 Sanders, Bernie, 50, 189 Sanofi (company), 66 satellite technology, 114, 117 Savile Row, 144–5 Schleicher, Andreas, 84 Schneider, 12 schools, 82–5 science and technology, 94–6, 101–22 Scotland, 200, 227, 256, 259 Scotland Act (2016), 227 Scott, Ridley, 134 Scott, Tony, 134 Scottish & Newcastle (company), 10 Scottish independence referendum (2014), 44 Scottish Nationalist party (SNP), 221, 227 sea ports, 274–6 seasonal migrant workers, 62 Seattle, USA, 200 Sedwill, Sir Mark, 235 Selective Laser Melting (SLM) technology, 106 selective schools, 83 Selenium software, 97 service industry, 63 Shafik, Nemat ‘Minoche’, 192

Shapps, Grant, 273 Sheeran, Ed, 3 Shepperton Studios, 134 Siemens, 106–7, 235 Silicon Valley, 50, 57, 77, 129 Silverstone, 148, 149 Singapore, 47, 88, 89 single currency, 173 Single Market, 59 Sinn Féin, 228 Sizewell nuclear reactor, 260, 283 Skepta (rapper), 138 Sky TV, 124, 130–1, 133, 145, 146, 151, 316 Skyscanner (company), 121 Slack (app), 122 Slade School of Fine Art, 144 slave trade, 285, 290 Slobodian, Quinn, 274 smartphones, 49 Smith, Roderick, 270–1 Smiths Detection (company), 80 Snow, C.P., 101 social care, 191, 208, 211–17 social contract, 191–6, 208, 211, 216, 218 social dislocation, 49–50 social insurance, 216 social media, 48–9, 231 social mobility, 217 SoftBank Group, 16, 72, 109, 316 software and technology, 7–8, 19 Soleimani, Qasem, 115 SONIA, 174 Soriot, Pascal, 10, 65, 66–7, 75, 242, 297 Sorrell, John, 151 South Korea, 47 Southampton Science Park, 78–80 Spain, x, 263 Spectral Edge (company), 7–8 Spiel, Peter, 126 sport franchises, 145–50 Spotify, 126, 136–7 Staley, Jes, 160 Standard Chartered, 173 Standard Life Aberdeen, 247 Star Wars films, 133, 135 Starmer, Sir Keir, 220 start-up culture, 55, 126 STEM education, 86


INDEX Stiglitz, Joseph, 163, 317 Stoppard, Tom, Leopoldstadt, 123 Stormont, 228 Stormzy (rapper), 138–9 Streamline (company), 158 Street, Andy, 237 Stryder, Tinchy, 138 Sturgeon, Nicola, 221–2, 227 Suleyman, Mustafa, 125 Sunak, Rishi, 5, 23, 94, 205, 234, 274, 306 Supreme Court, 223 surveillance skills, 116–17 Sutton Trust, 153 Swiftkey (company), 102 Swinson, Jo, 230, 233 Switzerland, 10 Symetrica (company), 80 Synergetic Air Breathing Rocket Engine (SABRE), 113 Tallinn, Jaan, 126 Tata Steel Europe, 107 tax avoidance, 50 tax reforms, 203 Taxpayers’ Alliance, 203 tech companies, foreign investment, 101–2 Tech Nation, 120, 121 tech start-ups, 102, 110, 119–20 technical education, 203 technology sector, 55 Terra Firma (private equity firm), 155 Tesla, 99, 280 Thames Gateway, 274 Thames Tideway (sewer), 272, 282–3 Thames Water, 13 Thameslink, 235 Thatcher/ Thatcherism, 2, 19–20, 37–8, 39, 43, 44, 68, 81, 176, 217, 256, 304, 305 theatre industry, 123–4, 156, 293 Thermo Fisher Scientific, 93 Third Point (investment manager), 172 Thomas Cook, 250 Three (telecommunications company), 266 Thunberg, Greta, 253, 278 Tickell, Sir Crispin, 33, 36 Titanic Studios, Belfast, 316

Top Gear (TV show), 131 Toshiba, 99 Toyota, 99 trade unions, 38, 193 Trades Union Congress, 193 Transport for London, 269 Travelex (currency exchange), 117 Treacey, Philip, 144 Trump, Donald, 18, 29, 43, 57, 60, 115, 179, 189, 266, 310 Truss, Liz, 236 TSB, 180 Turing, Alan, 92 Turkey, 47 Turl, Peter, 279 Turner, Lord Adair, 207 Turner Report, 207, 215 Tusk, Donald, 222 Twitter (company), 102 Two Popes, The (film, 2019), 156 Tyrie, Sir Andrew, 303 Uber (company), 20 UK Centre for Medical Research and Innovation, 77 UK Creative Industries International Strategy, 53 UK Digital Strategy, 120 UK Finance, 178 UK Independence Party, 18, 28, 44 UK Industrial Strategy, 54 UK Research and Innovation Agency (UKRI), 90–1 UK Space Agency, 114, 117 unemployment rates, 195, 197 Unilever, 9, 12, 20, 108–9, 241, 249, 289, 299–302 Union (UK), fractures in, 226–9, 239, 288 Unipart (company), 99 United States of America (USA), 3, 29, 34, 266–7 Universal Basic Income (UBI), 199–200 Universal Credit, 224, 309 Universal Music, 137 universities, UK, 69–81, 87–8, 94–5, 153, 310–11 University College, London (UCL), 70, 76–7, 125, 141; Institute for Innovation and Public Purpose, 53


INDEX university education, access to, 189, 202 Vantiv (company), 55, 159, 160 Victoria and Albert Museum, 124, 144 Victorian infrastructure, 256 video on demand (VOD), 132 videogaming industry see gaming industry Viertal, Tom, 134 Virgin Music, 139 Virtual and augmented reality (VR/ AR), 110 VocalIQ (company), 102 vocational learning, 85, 87 Vodafone, 264, 266 VRTU (company), 110 Wales, 227 Walport, Mark, 90–1 Walt Disney, 130 Warren, Elizabeth, 50, 189 water utilities, 6 Wates, Sir James, 246 WaveOptics, 110 Waymo (company), 98 Weinstock, Sir Arnold, 266 Wellcome Sanger Institute, 69, 73 Wellcome Trust, 77 Wells, Mike, 172 Westinghouse (company), 99

Westlake, Stian, 181 Westwood, Vivienne, 142, 144 White, Sharon, 264–5 Whole Foods, 130 Wild, Mike, 269 Wiley (rapper), 138 Willetts, David, 195–7, 201, 206 Williams Advanced Engineering, 116 Williams Grand Prix Holdings, 99 Williams Racing, 149 Wilman, Andy, 131 Wilson, Harold, 16, 82, 99–100, 193 Winehouse, Amy, 137 Winter, Greg, 72, 92 women, in corporate life, 246–50 Woodford (fund manager), 250 Woodhead, Christopher, 152 Working Time Regulations (1988), 31 World Bank, 13, 27, 42, 278 World Economic Forum Gender Equality Index, 247 World Trade Organization (WTO), 42, 58 Worldpay, 48, 55, 158–60, 177, 179, 182 Xi Jinping, 75 Zephyr programme, 116 zero hours contracts, 202 Zoom (app), 121, 314