The UK needs the vision and strategy of Pep
Industrial strategy + Podcast + Consumer confidence + Business books
Manchester City 4 Real Madrid 0. That result in the Champions League semi-final on Wednesday night was not about 11 brilliant Man City players doing their own thing. It was about the players executing the vision of Pep Guardiola, their manager. It was a sporting masterpiece. At half-time Man City had 196 touches in the attacking third while Real Madrid, the defending champions, had just ten. I found that stat in Matt Dickinson’s piece for The Times about the match, a piece in which he compared this Man City team with the greatest football teams of all time. One of those teams was Arrigo Sacchi’s AC Milan in the late 1980s. Matt Dickinson wrote of that team:
Sacchi knew that his tactical innovation, a squad’s vast talent and a grand stage had come together in perfect synchronicity. ‘The greatest compliment I received was when people said my football was like music,’ he noted.
You can read that piece in full here.
Sacchi, like Guardiola, was blessed with brilliant players, some of the best in the world at the time, including Marco van Basten, Ruud Gullit and Franco Baresi. But success and brilliance came from orchestrating them, playing football as he envisaged it - “perfect synchronicity” as the piece above describes.
Which brings me to the lack of an industrial strategy in the UK. The idea that the economy can thrive without a strategy or vision behind is misplaced, even if all the individual players - ie the businesses - are brilliant. Especially so in a world where the competition - other countries - do have a strategy and vision. It’s like Guardiola sending out his 11 players without a plan. They would still be good players, but they could be so much more, and they would be dismantled by teams with a plan.
Three former business secretaries from across the political divide criticised Rishi Sunak this week for not having an industrial strategy. These were Lord Mandelson, the former Labour business secretary, Sir Vince Cable, who was business secretary for the Liberal Democrats in the Coalition government, and Greg Clark, who was the Conservative business secretary under Theresa May. In a story in the Financial Times, Clark said:
”You need to be active and activist. When it comes to gigafactories, you need to go around the world, find out why people are going elsewhere and work out what you can do to address it.”
Lord Mandelson said:
“I remember Rishi Sunak saying to me when he was chancellor that he did not see it as part of his job to have businesses forming an orderly queue in front of his office asking for handouts.”
Lord Mandelson and Sir Vince both oversaw and spoke about an industrial strategy when they were business secretary. Theresa May’s government actually changed the name of the business department so that Clark led the Department for Business, Energy and Industrial Strategy. However, Kwasi Kwarteng scrapped the industrial strategy when he became business secretary under Boris Johnson.
As the FT piece notes, Jeremy Hunt, the chancellor, said at the British Chambers of Commerce conference this week: “We do have an industrial strategy.” That strategy, he said, revolves around five sectors - digital technology, green industries, life sciences, advanced manufacturing and creative industries. You can read the FT story in full here.
But if there is a industrial strategy then it is not being communicated clearly. That is the equivalent of Guardiola or Sacchi sending out their players without telling them the plan.
The lack of an industrial strategy has come up constantly in our Business Studies podcast. Check-out our interview with Miles Roberts of DS Smith for an articulate explanation of why it matters. You can listen to that here. Sir Nigel Wilson, the outgoing chief executive of Legal & General, also talked about the importance of an industrial strategy in a recent interview with The Mail on Sunday. He said:
“Tax charges in Britain are at an all-time high, but tax breaks are not necessarily the answer. The key question is how you structure industrial policy.
“For too long, it was the Conservative party view that the market will deliver. But we've got to have an industrial strategy, backed up by a tax strategy.”
You read that piece here.
There have been some big business stories this week that highlight the importance of an industrial strategy and why it can help deal with important questions in the future. How will the UK manage developments in artificial intelligence? How much do we want car makers to build new battery factories here? How does the UK ensure it has enough computer chips to power key technologies? Without a strategy the UK will just make decisions on the hoof and miss opportunities. While we have this debate, Emmanuel Macron held an event this week promoting France as a place to invest, with Elon Musk among those to attend.
BT also announced this week that it plans to cut 55,000 jobs - around 40 per cent of its 130,000 workforce - by the end of the decade. Philip Jansen, the chief executive of BT, said the rise of AI technology would account for some of these job losses. He added:
“Generative AI is a huge leap forward. Yes, it has risks and we’ve got to be very careful, but it’s going to be as big as the internet and as big as mobile phones. This is a massive change, but it will take a bit of time.
“The positive part of it is there will be loads of new services, new applications, new innovation, new products that will emerge as a result of this new AI, and that’s new jobs.”
More from Jansen in The Times here. The Daily Mail posed its own question about these job cuts…
The Times also reported on Friday that the government has offered £500 million to Jaguar Land Rover to encourage them to build a gigafactory - which produces batteries for electric cars - in the UK rather than Spain. More here
Meanwhile, the government has unveiled a National Semiconductor Strategy that sets out how £1 billion will go into the design and research of the chips that power technology around the world. The announcement on that is here. However, critics have already spotted a problem with the plan. As the FT explains:
The amount pledged by the government is dwarfed by Washington’s Chips Act, which involves $52bn of subsidies and incentives to encourage semiconductor companies to build fabrication plants in the US. The EU has also launched its own “European Chips Act” with €43bn of state aid.
More on the strategy in the FT here.
This semiconductor strategy and the offer of financial support for JLR suggests that the government is not ideologically opposed to setting out plans or offering hand-outs. As we covered in last Friday’s Off to Lunch (which you can read here), Sunak believes that the state should intervene in free markets at times. But the UK needs more than this to be globally competitive and deal with the big questions on the horizon. It needs a vision and it needs a strategy.
Podcast…
Our latest episode of Business Studies looks at childcare and teaching with Brett Wigdortz, the founder of Teach First and Tiney. The episode looks at why childcare has been such a crucial and difficult issue for modern economies, how Teach First became the biggest graduate recruiter in the UK, how it helped Tony Blair tackle his “education, education, education” pledge and how Tiney, an online app to find childminders, is now helping to tackle the cost of childcare in the UK. You can listen to the episode on Substack here, Apple here and Spotify here.
A chart that helps you understand the world…
This is the GFK consumer confidence index over the last 20 years. It is the leading measure of the mood of households in the UK. As you can see, consumer confidence fell sharply last year amid rising inflation but has rebounded since then. Consumer confidence was lower in the summer and autumn of 2022 than it was during the financial crisis. The latest figures from GFK have been released today and show consumer confidence rose by three points to -27 in May. This is still negative, but it is a noticeable improvement on the depths of last year. The research is based on a sample of 2,000 individuals aged more than 16 years old in the UK.
You should also read this…
A fascinating feature on whether San Francisco is in a “doom loop” caused by drugs, a surge in house prices and remote working. There are some remarkable stats in this piece - including that 1 per cent of the population of the city is homeless despite four of the 10 most valuable companies in the world being based in the area. There are lessons for all cities in this… (Financial Times)
The details about two eagerly-anticipated business books have been announced this week. Michael Lewis’s book on Sam Bankman-Fried and the demise of FTX will be called Going Infinite: The Rise and Fall of a New Tycoon. It will be released on the 3rd of October (The Guardian) Walter Isaacson’s biography of Elon Musk will be released on September 12 (Simon & Schuster)
Should the government’s remaining 41.5 per cent stake in Natwest be given to the public? Could this be a way to revive stock ownership among households in the UK? (FT)
A brilliant piece on how Wizz Air and Luton airport meant the UK’s stats on immigration were badly wrong and why data is only useful if you know what to look for (FT)
Eurovision boosted spending in Liverpool shops by £20 million (The Business Desk)
The Bank of England told the government in March that it plans to reject Revolut’s application for a banking licence (The Telegraph)
Germany is having similar conversations to the UK about how to boost investment in promising start-ups. The UK is actually well ahead of Germany in terms of creating unicorns - start-ups valued at more than $1 billion (FT)
A conversation between author David Epstein and psychologist Adam Alter on how to make breakthroughs or innovate when you are feeling stuck. The ideas include shaking up your routine, bringing in new people and acting before you think (Range Widely)
And finally…
Unfortunately the new Indiana Jones film appears to have attracted uniformly terrible reviews. So, on a most positive note, check out this round-up of Harrison Ford’s 20 best performances by The Guardian. I would have added his turn as television journalist Mike Pomeroy in Morning Glory to the list. That 2010 film is a surprisingly enjoyable watch about breakfast television. The piece is here.
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Best
Graham