A broken relationship...
Business v the government + Missguided + 1952 and Russell Hobbs
The relationship between the government and the business world is more broken than I have ever known it. They don’t listen. They are unpredictable. You don’t know who to talk to. They are anti-business. That is just a flavour of the comments that have come up in my recent conversations with business leaders. I spoke to two chief executives of big companies in the food and leisure sector yesterday. One said the way they had been treated by a regulatory body was a “f**king disgrace”. The other said the government was “not friendly at all to businesses”.
These two CEOs lead businesses that have expanded across the country, shaken up their industries and are exactly what the UK needs more of. They do not want or expect any help from the government to be successful. There is no inherent reason why their business should be wary of the government. They are not, for instance, CEOs from the oil and gas industry, who are reeling from a windfall tax on their profits.
I hear the same wariness from trade bodies who were previously enthusiastic about this government and its levelling-up plans. They are concerned that Kwasi Kwarteng, the business secretary, doesn’t listen to them and revels in bashing businesses in public. They are concerned the Competition and Markets Authority looks to intervene in every deal. I see this morning that the CMA has announced it will look at the merger of BT Sport and Eurosport. In short, there is concern that the government is getting in the way…
This, to put it bluntly, is not good. If the UK is to succeed in levelling up its economy then government policy and business strategy need to be aligned. Start-ups need to have a fertile environment to rise and grow. Overseas investors want reassurance that they are putting their money into a stable regulatory environment.
One of the consequences of the breakdown in this relationship is the travel chaos across the UK. Don’t get me wrong, airlines, airports and other businesses have made big mistakes. Flights have been sold to people when there wasn’t the capacity to operate them. But the fact that multiple airlines and airports are having the same problem suggests something fundamental has gone wrong. As I said in Monday’s newsletter, this has been going on for weeks at some airports, like Manchester. Yet there has been a lack of communication. The blame game is already well underway…
Thank you to all the readers who have got in touch since Monday with their own experiences and suggestions about how to resolve this. Interestingly, these revolved around policy rather than being aimed at individual airlines and airports. On this note, The Times is reporting this morning that aviation bosses are in talks about getting access to tax records to help them employ staff faster. That story is here.
The government’s stance towards businesses stems from the difficult position they find themselves in with voters amid partygate and the cost of living squeeze. Naming and shaming businesses for increasing prices, profiteering and poor service helps to deflect blame for the economic slowdown. In reality, a complex concoction of factors are combining to push prices up and disrupt supply chains - Russia-Ukraine, Covid in China, Brexit, and more. There is little that the government or businesses can do on their own to resolve this.
The relationship between business and government will be fascinating heading into the next election. The days of business leaders signing letters backing the Conservative party, as they did in 2010 or 2015, feel a long time ago. I don’t think either side would consider that a good look right now. On the Labour side, Rachel Reeves, the shadow chancellor, is making a positive impression with the business leaders, but uncertainty about their economic plan remains.
A Missguided Mike Ashley
Mike Ashley’s Frasers Group has bought the remnants of online fashion retailer Missguided for £20 million. Frasers, previously known as Sports Direct, is now led by Ashley’s son-in-law Michael Murray and the deal is a further sign of how he wants to move the company into fashion and away from its pile-it-high-and-sell-it-cheap approach. This is part of a plan to try to rebuild relations with fashion brands (including Adidas and Nike) and persuade them to let Frasers have access to their best products. Frasers has said that Missguided will operate as a standalone business within the group.
For Manchester-based Missguided and its founder Nitin Passi (pictured below), this is not the way the story was supposed to end. I interviewed Passi when I was at Telegraph in 2014. Back then Missguided looked like the next Asos or Boohoo. But while those businesses have gone on to grow and buy failed high street chains like Debenhams and Topshop, Missguided has ended up being bought by a high street retailer. Passi founded Missguided in 2009 from his bedroom in Manchester with a £50,000 loan. He visited local wholesalers to buy clothing samples and then put photos of the products on a website to try to sell them. When he realised which of these products were popular, he bought more. “We are not fast fashion, we are rapid fashion,” he said.
However, Missguided struggled to consistently make a profit, not helped by attempts to open physical shops in shopping centres, which were subsequently closed. The rise of Chinese online fashion giant Shein also increased competition further and has reshaped the youth fashion market. Charged, which covers retail tech new, has looked at Missguided problems in more detail here if you want to read more.
A tweet that helps you understand the world
Something more light-hearted than usual for this slot. As this tweet shows, 1952 means something to Russell Hobbs as well as the Queen.
Russell Hobbs is a strange business in many respects. It is a brand that many people know but few know much about. The business itself is today part of an American company, Spectrum Brands, which also owns Remington, George Foreman grills, and Black + Decker. Spectrum is valued at $3.6 billion by the US stock market. To get to this point, however, Russell Hobbs has a rich history.
Russell Hobbs was founded by Bill Russell and Peter Hobbs in 1952 after they developed a coffee percolator called the CP1. In 1955 they made a crucial breakthrough when they invented a kettle called the K1, which Russell Hobbs says was the first in the world to automatically turn off once the water inside it had boiled. The company grew rapidly from there, moving into other products such as toasters. Today, Russell Hobbs’ kettles and other household appliances are ubiquitous in British homes.
Russell Hobbs ended up being owned by Spectrum Brands after a series of corporate deals over the years that saw it owned by, among others, the collapsed Polly Peck. Spectrum bought Russell Hobbs in 2010 in a $675 million deal. Bill Russell died in 2006 and Peter Hobbs in 2008.
You should also read this
Andy Street, the West Midlands mayor and former John Lewis boss, wants Boris Johnson to give him the power to raise money from overseas investors to help level-up the UK (The Times, paywall)
Psychologist and author Adam Grant on why he dislikes evangelising about the mental health benefits of meditation. It actually makes you more self-absorbed, research shows (Adam Grant Thinks Again)
India’s answer to Facebook, ShareChat, has secured a $5 billion valuation after raising $300 million in new money. This story may only just be getting started… (FinFloww)
Blackpool-born trader Simon Sadler, who owns Blackpool football club, has become a big player in financial markets in Hong Kong but now faces regulatory scrutiny over block trades (Financial Times, paywall)
Goldman Sachs and Softbank have invested in Croatian electric supercar maker Rimac, giving it a valuation of at least €2 billion. Rimac is a name to watch in the electric car world (Financial Times, paywall)
And finally…
I have made it to the end of WeCrashed, the Apple TV+ drama series on the rise and fall of WeWork, the US provider of co-working and office space. Some quick thoughts:
At eight one-hour episodes, it’s too long. The series could have been shorter and faster
Jared Leto is brilliant at Adam Neumann, WeWork’s co-founder, pictured below with his wife Rebekah, who is portrayed in the show by Anne Hathaway. Leto somehow makes you feel some sympathy to Neumann’s ambition to build his own business and “elevate the world's consciousness” (that’s honestly what WeWork said it was trying to do).
It is also worth sticking with the show because it’s a fascinating insight into building a start-up and how it collides with Wall Street. At its peak WeWork was worth $47 billion, yet it turns out the power still lay with the moneymen, not Adam Neumann. In this story the moneymen are Softbank’s Masayoshi Son, JP Morgan’s Jamie Dimon, and venture capital firm Benchmark. “'In a fight, who wins — the smart guy or the crazy guy?” Son asks Rebekah at the end of the show after helping to oust Adam from WeWork. “It’s a trick question. It’s the one with all the money.”
Thanks for reading. Please note, there will be no Off to Lunch this Friday due to the Jubilee bank holidays. However, I will be back on Sunday with another press review. If you want to contribute to the work of Off to Lunch, then please sign up for a paid subscription below. Alternatively, please just spread the word!
Graham