Britain should own more shares...
A cost of living solution? + Lessons from Lionesses + Bitcoin
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If every household in Britain owned shares in BP or Centrica they would have a nice hedge against their rising household bills and receive their own windfall tax from these companies thanks to an increase in their dividend payment as they posted rising profits. I don’t mean nationalisation, just shares in the listed companies they are today. Instead of a “them and us” debate about City fat cats, multi-million bonuses and dividend payments, everyone would have a piece of the pie. This is, of course, a fantasy. But it is also how capitalism is supposed to work and not enough is being done to make it a reality or promote it.
Last week Centrica, the owner of British Gas, and Shell prompted anger by posting bumper financial results as households struggle with rising energy bills. BP will do the same tomorrow. The companies are benefitting from the rising oil and gas prices which are hurting households. Centrica reported underlying operating profits of £1.3 billion for the first six months of 2022, up from £262 million a year ago, and said it would pay a dividend of £59 million to shareholders, the first since 2020. Shell’s underlying profits for the second quarter of 2020 - April, May and June - hit $11.5 million, a record level and more than double the $5.5 billion of a year ago. The oil group said it would pay $6 billion to shareholders through a share buyback. This prompted much anger from predictable places…
This is a story that has also cut through judging by the conversations I have had with friends, family and contacts over the last few days.
The anger behind these numbers is underpinned by a feeling that they are detached from households, that people have no stake in them. In reality, of course, we do through our pensions. The biggest shareholders in Centrica and Shell include Vanguard, Blackrock and Schroders, which all manage UK pension funds.
However, the reality that Margaret Thatcher promoted in the 1980s when the government privatised British Gas was that everyone would also hold shares directly. The “Tell Sid” advertising campaign encouraged people to buy shares in the privatisation as Thatcher realised that promoting a share-owning democracy could be a powerful political tool. Where privatisation had once been about cutting the national debt and raising cash, it also became about promoting the idea that people could have a stake in these companies themselves, undermining those who pushed socialism.
Yet according to the Office for National Statistics the proportion of UK shares held by individuals in this country was just 12 per cent in 2020 (the most recent year available). This was down 1.3 percentage points on 2018 and down from 28 per cent in the early 1980s. In other words, the share-owning democracy envisaged in the 1980s has not materialised. In contrast, 56.3 per cent of UK shares in 2020 were held by international investors - institutions and individuals - which was a record high. This is the ONS chart on share-ownership…
And this is how individual share ownership has declined over the years…
There has been a similar trend in the US until the rise of Robinhood and commission-free trading, which could ultimately help to boost share-ownership among consumers. Surveys showed that the vast majority of Americans felt that the record highs on Wall Street pre-Covid had little or no impact on their personal finances.
Merryn Somerset Webb has written an interesting book on this topic: Share Power: How Ordinary People Can Change the Way that Capitalism Works – and Make Money Too. As she points out, owning shares in a company means you can vote on executive pay and some strategic decisions like takeovers too.
Now, I am not saying that everyone in Britain should go dabbling in the stock market. People do not have the disposable income for that. But it would be refreshing to hear the candidates to be the next prime minister debate issues like this, or explore safe mechanisms to help people invest, or do more to promote the link between shares and our pensions. While Britain has constantly promoted home-ownership, share-ownership has been nowhere. Yet between 2010 and the end of 2019 the FTSE 100 and FTSE 250 outperformed house prices on a capital value basis. There is an imbalance here, we should consider what to do about it.
Lessons for business from sport…
The business world doesn’t learn as much from sport as it could. I don’t mean the business of sport, that is often a mess, but what actually happens on the pitch, the court, the track or the pool.
Take innovation, for instance. Innovation tends to happen much faster in sport, whether it be tactics or training methods or equipment. This can be traced back to every team or player starting every season or match with the same thing - zero points, nothing. Any previous advantage you had has gone, there is nothing to defend.
Ideas are also ruthlessly copied and improved because there are no monopolies or patents in sport. Innovations that work are quickly built on and developed, forcing the innovator to get better to catch-up.
This is one of the reasons why Premier League managers have a shorter lifespan than FTSE 100 chief executives and why there are vastly fewer internal promotions in football - teams are constantly looking for new ideas rather than protecting what they have. Research from the recruitment firm Heidrick & Struggles last November showed that 68 per cent of FTSE 100 chief executives were internal appointments. At the same time that percentage for Premier League managers was 10 per cent, just two of the 20 teams.
I flagged one example in Friday’s newsletter about a sports story that could have repercussions for businesses - the Kyler Murray contract saga in the NFL. Are we about to see more businesses insert clauses in contracts demanding certain levels of productivity in return for flexible working?
Anyway, I mention all this because of England’s brilliant victory in the Women’s Euro 2022 final yesterday. There is surely much to be learnt from this team about leadership, teamwork, coaching and strategy. There is also much to be learnt about the growth of women’s football and empowering young women, something many businesses across the country would benefit from given the continuing disparity between men and women in leadership positions (just 10 of the 100 chief executives in the FTSE 100 are women).
Two things on this I wanted to quickly flag. Firstly, the Sunday Times’s interview with the US coach who has helped to develop some of the England players and others around the world is worth reading. Anson Dorrance says he encourages the women he coaches to embrace their competitiveness and ignore the negative stereotyping of women who are competitive (a quality that is celebrated in men, in contrast). As Lucy Bronze told Dorrance in a podcast interview in 2020: “The day that I turned up to Carolina was the day that I realised actually it was OK to be like that.” Check out more on the importance of how we see competitiveness in the workplace in the link to the Adam Grant piece below. In short, research shows that men are more competitive than women and more likely to see the benefits of competition. This matters.
Secondly, I really hope people are seeking to learn from Baroness Sue Campbell as she is clearly a genius…
Housekeeping and holiday
Just a reminder that Off to Lunch will be taking a summer break between Monday August 8 and August 22. I will be taking the opportunity to rest, refresh and work on some new ideas to improve Off to Lunch, including the launch of our podcast in September. If you would like to pause your subscriptions during this period, please do so - the option is available through the “manage subscription” or “settings” option on your Substack profile page.
A chart that helps you understand the world…
I haven’t featured the bitcoin chart in here for a while, so here you go. As you can see, bitcoin’s dive in 2022 has stopped in the last month, with the cryptocurrency enjoying its best month since October 2021 in July, rising 27 per cent. This bump came amid a wider recovery in markets, with US stocks enjoying their best month since November 2020 and the FTSE 100 enjoyed its best month since December 2021. Have we reached the bottom of the market or was this a dead cat bounce amid summer optimism and lower trading volumes? Corporate news was mixed last week, with better than expected numbers from Amazon and a profit warning from Walmart, two of the biggest retailers in the world. What is clear is that the cost of living crisis is going to get worse over the coming months, at least in the UK, with the Bank of England poised to increase interest rates by at least another 0.25 percentage points on Thursday and the energy price cap set to rise from £1,971-a-year to £3,420-a-year in October…
You should also read this…
Teaching sport at school is torn between helping kids with the potential to be elite and laying down healthy habits for everyone, according to Malcolm Gladwell. One answer to this important conundrum, he explains, is holding running competitions where performance is measured by the combined time of everyone on the team, meaning everyone matters. Fun piece (Oh, MG)
A brewery in Leicestershire is offering a £2,000 reward for anyone who can successfully recommend a new landlord for a pub (BusinessLive)
North Yorkshire and York are getting a mayor under a devolution deal that will be signed by levelling up secretary Greg Clark at the National Railway Museum (Yorkshire Post)
7.9 per cent of homes bought outside London are purchased by Londoners, up from 6.9 per cent pre-Covid, according to new research. In other words, people living in London are still looking to get outside the M25 even with lockdown restrictions gone. Only 22 per cent of these deals are for second homes, with everyone else moving (Bloomberg)
JP Morgan is building a new travel agency that it hopes will encourage customers to spend more with the bank (Wall Street Journal)
Great guide from the WSJ on why and how supply chains have become so complex. Lots of interesting observations in the piece, including how spotting bottlenecks has become difficult. A company may think delays in their supply chain are due to traffic at ports when actually it is being caused by issues with distribution centres. I’ve touched on this before, but some businesses are now working to make their supply chains less complex and shift from “just in time” manufacturing to “just in case” (Wall Street Journal)
Useful round-up of some new discoveries in behavioural science. These include findings that children as young as five are good negotiators and understand the concept of win-win, that questioning science is healthy, that understanding the benefits of competition could boost gender equality in the office and that being interrupted by email isn’t as bad for your productivity as you think… (Adam Grant Thinks Again)
Finally, here is Off to Lunch’s Sunday press review. It was sent to paid members yesterday, please click below and sign-up to read it in full…
And finally…
As mentioned yesterday I was in Bristol at the weekend. The city was buzzing with activity, a reflection of the flourishing economy there and the influx of tourists over the weekend. Two riverside recommendations from the weekend which I enjoyed: Three Brothers Burgers for a no-nonsense mix of good food and drink in a converted boat, and Left Handed Giant for craft beer (pictured below)…
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Best
Graham