The good, the bad and the ugly...
The business news that matters
Rishi Sunak has been speaking at London Tech Week today and helped to open the event. Although it is called London Tech Week, this event is about promoting promising tech businesses and investment in the UK more broadly. Sunak said:
“We must act – and act quickly – if we want not only to retain our position as one of the world’s tech capitals but to go even further and make this the best country in the world to start, grow, and invest in tech businesses. That is my goal.”
You can see the full speech below or read it here
The prime minister was able to welcome a well-timed announcement that Andreessen Horowitz, the venture capital fund, has chosen London for its first office outside the US. This office will be part of the firm’s cryptocurrency arm, which is called a16z crypto, and will focus on investing in crypto and blockchain start-ups. Andreessen Horowitz was founded by Marc Andreessen and Ben Horowitz. You can find the firm’s statement on the London expansion here. It says:
We have been working with policymakers and regulators across the globe, and during our discussions it has become clear that the UK government sees the promise of web3, with prime minister Rishi Sunak suggesting the UK can become a hub of web3 innovation. UK authorities are also willing to work with the industry to create policies that incentivize startups to pursue decentralization. More specifically, the UK policymakers and regulators are taking an approach that is uniquely tailored to blockchain and digital asset regulation.
The statement later adds:
While there is still work to be done, we believe that the UK is on the right path to becoming a leader in crypto regulation. The UK also has deep pools of talent, world-leading academic institutions, and a strong entrepreneurial culture. It is home to more “unicorns” than Germany, France, and Sweden combined; to some of the world’s largest financial markets and pools of capital; and to highly-sophisticated, world-class regulators. All of these make the UK strongly positioned to lead in web3.
As you can see, that is a resounding thumbs-up for the UK and London as a place to invest. It is also a win for Sunak, although some countries have decided that crypto investment is not something they necessarily want, given the doubts about how the technology will be used and the volatility of the financial markets attached to cryptocurrencies.
But while the investment from Andreessen Horowitz appears to be good news, there are some downbeat developments today too.
A survey of US businesses that operate in the UK has found that their confidence in the UK has dropped. Confidence in the UK fell from 7.3 out of 10 in 2022 to 6.5 this year. The findings are from a survey of 56 businesses across different sectors by BritishAmerican Business, a transatlantic business lobby group. It found that the US businesses had concerns about the UK’s post-Brexit trade with Europe, political uncertainty and high tax. The Financial Times has reported on the survey here
Meanwhile, Bloomberg has published a long-read from a collection of its most senior reporters in the UK. This looks at how executives at global companies are concerned about investing in the UK and its diminishing attractiveness. Dan Vahdat, the founder and chief executive of Huma Therapeutics, has invested in the UK in the past but is now looking elsewhere. He says in the piece:
“The hope was that with Brexit something should have changed, because the whole idea was that we were going to have more autonomy. But nothing has happened.”
Vahdat is not an outlier, according to the feature, and there is an “outpouring of complaints from leaders of some of the world’s best-known companies about the declining investment appeal of the world’s sixth-largest economy”. You can read the full piece here
Sifted has also looked at the challenges facing the UK, noting that late-stage funding for promising businesses is down 75 per cent year-on-year in 2023, compared to a 51 per cent fall in the US and 64 per cent in France. While Sunak and a collection of government ministers are appearing at London Tech Week, France has got Elon Musk and Salesforce boss Marc Benioff to appear at its event. Piece here
Those funding figures compare to a particularly strong start to 2022 for the UK, so they are not as bad as they seem. Also, while the Bloomberg piece appears particularly gloomy, many of the complaints from executives relate to government policy and the lack of a clear industrial strategy, rather than questioning the fundamental strengths that the UK still has, such as a talented workforce…
Other stories that matter…
1. There are more stories about rising mortgage costs around today. The Times reports on an analysis by Capital Economics that shows that the number of households with an interest rate of more than 3 per cent on their mortgage is going to rise from 3.2 million at present to 5.8 million by the end of next year. This will happen as fixed-rate deals expire and households are forced to move to new deals with increased rates. Story here. Meanwhile, The Telegraph reports that London homeowners will see their annual mortgage bill increase by £7,300-a-year on average if they move to a new fixed-rate deal this year. The average for the UK as a whole is £3,900. That is £608 extra every month for London households and £325-a-month for UK households overall. It is difficult to see how this does not have a negative impact on the UK economy, particularly consumer spending. The Telegraph story is based on research by the Centre for Economics and Business Research and you can find it here.
2. On a similar note, Jonathan Haskel, a member of the Bank of England’s monetary policy committee, has written in The Scotsman today that more interest rate rises are likely. “My own view is that it’s important we continue to lean against the risks of inflation momentum, and therefore that further increases in interest rates cannot be ruled out,” he writes. “As difficult as our current circumstances are, embedded inflation would be worse.” You can find his piece in full here
3. The rate at which employees leave a company is a powerful way to analyse the quality of the business and its strategic decisions according to a fascinating analysis by the Klement on Investing newsletter. Apparently looking at whether a chief executive has an MBA or not is useful too. You can read the piece here
4. The Wall Street Journal has written about why it’s okay to coast at work sometimes and that it can ultimately boost your career and performance over the long-term. “People want such immediate gratification,” says an operating partner at a venture capital firm. “You end up realising your career is long and you have plenty of time.” For those bored of reading about high-performance or executives who claim they get up at 4am every morning, this will be a refreshing change. Piece here
5. Check-out our Sunday press review for a round-up of the news in the weekend newspapers, including Crispin Odey, the potential sale of The Daily Telegraph and how Labour will change the Bank of England. Paying Off to Lunch subscribers received the Sunday press review yesterday and you can sign-up to get it next week here
And finally…
The former England cricket captain Mike Brearley is a fascinating character and a deep thinker, particularly about leadership. This is a man who got a first in Classics at Cambridge, retrained as a psychoanalyst after retiring from cricket and was approached to be a spy. Brearley has just written a new book and has been interviewed about it in The Times by Matt Dickinson.
Brearley, who is now 81, says that he thinks that attacking approach adopted by the current England team is linked to coach Brendon McCullum and captain Ben Stokes suffering from depression in the past, meaning they are passionate about making the game as enjoyable as possible. Interview here. Roger Alton also reviewed Brearley’s book - which is called Turning Over the Pebbles: A Life in Cricket and in the Mind - in The Sunday Times here
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Best
Graham