The end of laissez-faire in the UK?
Inflation, TransPennine and government intervention + Podcast + Other stories that matter
Supermarket bosses called into a meeting with the Treasury to discuss why prices are so high, TransPennine Express train services nationalised, Microsoft’s $68.7 billion takeover of Activision blocked, and a cap on energy prices. Taken together these events suggest a trend - the UK is done with laissez-faire economics.
It says something about 2023 Britain that the policies outlined above aren’t even that controversial. Business leaders in the north of England have been calling for FirstGroup to be stripped of its contract to run TransPennine Express for months. In March more than 15 per cent of TransPennine services were cancelled on the day they were due to run or the day before, the most in the UK according to data from the Office of Rail and Road. Local leaders such as Andy Burnham, the mayor of Greater Manchester, welcomed the announcement about the nationalisation…
The Telegraph points out that 43.4 per cent of the UK’s rail network is now in the hands of the government’s “operator of last resort” - which steps in when a company is stripped of a franchise - or local authorities. The Telegraph also reports on rumours that Liz Truss nearly stripped Avanti of the West Coat Main Line franchise when she was prime minister but decided not to when she was informed this meant nationalisation…
Rumour has it that Liz Truss was on the cusp of taking control of Avanti’s strike-ridden west coast railway line last autumn until Whitehall officials stepped in.
The then Prime Minister was about to sign-off the move when mandarins said: “You do know that this means nationalisation?” – so the story circulated among railway bosses goes at least.
Truss ultimately did an about-turn on the idea to protect her principles.
Her successor in Number 10 has no such qualms.
You can read that feature here
The front-page of The Times on Friday reports on how the Treasury spoke to supermarket bosses about the price of food after the Bank of England increased interest rates again from 4.25 per cent to 4.5 per cent to try to tackle inflation, which is still at 10.1 per cent. This story says that Downing Street has looked at how France has capped the price of certain foods but does not intend to adopt that policy. You can read that story here.
MPs on the environment, food and rural affairs committee have announced they will investigate “fairness in the food supply chain”. The parliamentary committee has called for evidence on its website and says:
With households facing the highest levels of food price inflation since the 1970s, the EFRA Committee will look at issues throughout the food supply chain from ‘farm to fork’. It will investigate how profitability and risks are shared through the food supply chain and the existing government system of monitoring and regulation of these.
This all comes two weeks after the Competition and Markets Authority blocked Microsoft’s acquisition of Activision. That decision prompted a furious backlash from the two companies, which claimed that the UK was “closed for business”, as we reported here. But criticism of that decision outside the companies involved has been relatively subdued. As Helen Thomas at the FT covers in a column today, there are those who feel that the seemingly unstopped expansion of big tech needs to be reined in to encourage investment and innovation from start-ups. She writes:
The tech tantrum appears to have provoked little angst — politically or otherwise. If anything, the CMA has been increasingly robust in making its case that vibrant, vigorous competition is good for businesses, innovation, customers and the economy. There is, globally, a sense that a tendency towards laissez-faire didn’t work, in tech particularly but also more broadly. (Sarah Cardell, head of the CMA, recently flagged private equity roll-up strategies as a particular area of interest.) The UK is probably at the forefront of efforts to expand the regulatory toolbox to address those concerns.
You can read that column in full here
These trends are not just evident in tech regulation, but elsewhere. They are happening under a Conservative government too, one led by Rishi Sunak, who has exposed his free market principles and experience in Silicon Valley.
It is worth at this point revisiting Sunak’s Mais lecture from 2022 in which he outlined his economic approach in detail. This approach, as you will see, recognises the limits of a laissez-faire approach and the free market. Laissez-faire is defined by the Cambridge Dictionary as “unwillingness to get involved in or influence other people's activities”. The Collins dictionary puts this specifically into an economic and political context: “The policy which is based on the idea that governments and the law should not interfere with business, finance, or the conditions of people's working lives.”
In Sunak’s speech, made in February 2022 when he was chancellor, the prime minister said: “The best way to organise our economy is around free market principles”. However, he added:
“For all that there is a moral and material case for the market, I recognise its limits.
“First, because change is inherent in a free market; the ‘perennial gales’ of disruption and dislocation are the price we pay for the promise of a better standard of living. The moral case for the market rests not just on freedom.
“It is not enough to say to someone whose job has moved overseas, whose wages aren’t growing, or whose occupation is no longer deemed useful: be grateful for your freedom. Yes, you can have freedom without dignity, but I doubt many of us in this room would choose it or think it a particularly edifying existence.
“So it is incumbent on government to support people, especially those unable to support themselves, and through the welfare state, public services and education. Its why we raised the National Living Wage, cut the tax rate in Universal Credit, and are so focused on reducing regional inequality and levelling up.
“Second, the free market creates the wealth that allows us to support our families and our communities. But we need to guard against the market reaching too far into these realms, eroding the bonds between us, and turning a market economy into a market society.
“And third, the market has limits in dealing with externalities like climate change, and periods of profound disruption like wars, financial crises, or pandemics. Having been part of a government that had to actively shutdown the economy, and introduced interventions like the furlough, I know this as well as anyone.
“But the biggest challenge the free market faces today is where new growth will come from. And that’s why we need a new culture of enterprise.”
You can read that speech in full here. The words give context to recent events.
When inflation is high and households are frustrated the sort of interventions we have seen recently are always going to be more likely. But there is more to come, even without Labour and Keir Starmer winning next year’s general election. For example, the government wants to set pension funds a target of investing 5 per cent of their portfolios in projects that help to level-up the UK. More on that in the FT here.
Podcast…
The latest edition of our Business Studies podcast looks at the story behind Oxford Nanopore Technologies and its founder Gordon Sanghera. Oxford Nanopore is one of the most exciting companies operating in the UK today and Sanghera is not your average CEO.
In the episode we talk about how he co-founded the company in his early 40s after a mid-life crisis, how Oxford Nanopore went from a university spin-out to a listed company worth more than £2 billion and why football has played such an important part in his life. Sanghera also discusses what the UK needs to do to build more promising companies. Rather than focus on innovation and glamorous start-ups, he explains, the UK needs to get better at building ideas into proper businesses and keeping them here rather than selling them.
Sanghera is candid, insightful and refreshing. The story of Oxford Nanopore and its technology is fascinating.
You can listen to the episode on Substack here, Apple here or Spotify here.
You should also read this…
The independent inquiry into the Post Office Horizon IT scandal has heard some remarkable testimony about how this miscarriage of justice occurred. This scandal led to the wrongful arrest of hundreds of subpostmasters across the UK for theft and fraud when the shortfall in money for the Post Office was actually caused by a problem with its IT system. For updates and analysis on the inquiry I recommend following this website by Nick Wallis, a journalist who has followed the scandal closely. The latest development involves bonuses being paid to the Post Office’s executives for co-operating with the inquiry… (Post Office Scandal)
Bolton Wanderers is looking to raise £3.5 million from fans to fund player transfers this summer and improvements to the football club’s facilities. Bolton is issuing a bond that will pay 8.5 per cent interest a year for the next five years (Business Live)
Three interesting pieces on work-life balance caught my eye this week. Sarah O’Connor in the Financial Times writes about how flexible working has led to staff reporting an improvement in the quality of their work and their work-life balance (Financial Times) The Wall Street Journal reports on how job satisfaction in the US has hit a 36-year high (Wall Street Journal) And Harry Wallop writes in his regular column for The Times about how he has lost patience with executives who claim to have few interests outside their job (The Times)
Ireland is launching a sovereign wealth fund (The Telegraph)
Anyone who has enjoyed playing Football Manager over the years should check out this interview with Miles Jacobson, the studio director at Sports Interactive, which makes the game (Jimmy’s Jobs of the Future)
A useful summary of the announcements that Google has made about AI technology this week and how it will be integrated into the online apps we use (Platformer)
Airlines are investing in new first-class seating and cabins that look more like hotel rooms (Bloomberg)
A look at the remarkable increase in the wealth of shipping tycoons over the last three years amid disruption to supply chains around the world. The combined net wealth of the ten wealthiest tycoons has risen from $60 billion to $155 billion according to Bloomberg (Bloomberg)
And finally…
Thanks to The Upshot for pointing out this superb Twitter account that tracks how Jason Tindall, the assistant manager of Newcastle United, constantly tries to upstage his boss Eddie Howe. A couple of the highlights are below. Some amusement for you on a Friday. Look at how many times these tweets have now been viewed…
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Best
Graham