Investors need to rediscover the age-old virtue of patience to recharge our economy
If you do a smart job spending taxpayers’ money you can make businesses more productive and drive wages up. Economists can debate the merit of that idea but be in no doubt, ministers believe every word. They spelled it out in a series of autumn announcements.
Even those ministers though don’t think the state can single-handedly spend its way to a better economy.
To put it bluntly: the government can’t level up the UK without the private sector. Treasury money spent today is supposed to encourage private spending tomorrow, in the right places and with the right impact for workers.
That will only happen if investors step up too. Are those investors doing enough to help? I suspect this question may be asked more loudly in the months to come.
We all know that companies face increasing public scrutiny, whether it’s about the diversity of their leadership or their environmental records. Before long they may well also be asked: how is your money helping Britain’s economy? They can expect scrutiny about where they make investments, what sort of jobs they create and – crucially – how long they stick with their investees.
Higher productivity and higher quality employment will only come by building better companies. Achieving that takes patience. It means giving new companies time and space to grow into really substantial enterprises. It needs investors who won’t sell out at the first sniff of a tempting quick return. In other words – it takes patience.
There is, as always in investment, a bit of jargon for this: patient capital. It’s the sort of spending that, in the Treasury’s words, “supports entrepreneurs and investors to make a return from the substantial growth of a business, rather than through short-term profits from low-risk projects.”
We need much more of it, and not just in London. It’s more than possible to maintain a prosperous modern business outside either the South East or our great cities. Just look a Breedon Group, the listed construction firm based in a village in the Leicestershire countryside. It’s time to grow many more of these.
The government is acting on this specific idea. It has created British Patient Capital (BPC), which has made over £1bn of commitments itself, sparked a further £4.8bn of investment from third parties and is already the UK’s largest domestic investor.
Following Rishi Sunak’s Autumn budget, there is also plenty of state spending to boost the economy: £1.4bn to stimulate sectors like manufacturing and offshore wind in the Global Investment Fund and £1.6bn to finance regional SMEs from the British Business Bank.
All of this creates an opportunity. But if that opportunity is not taken – if business does not get behind these projects with the right backing and the right philosophy – it will not only be politicians held to account. Voters will ask why cash is clustered in one part of the country, and why investment isn’t delivering results where they live.
First and foremost, business people have to deliver results for customers, shareholders and other investors of course. Anyone that fails on these fronts will have failed outright. But it is possible to achieve these goals while showing a little patience and not demanding immediate returns.
There is no legal obligation, of course, on any business to boost the regional economy or invest for the long term. But they can. Investors have power. They decide what sort of economic change they want to create. They can choose now to build companies that are truly innovative, sustainable and significant. It may well be that more of their staff and customers demand that they do just that.