Truss won’t be the first or the last to U-turn, but she taught us how not to do it
It has been less than four weeks since the disastrous mini-budget, followed by a series of screeching U-turns in government policy. It’s made for sickeningly compelling viewing, partly because most of us have, at times, experienced our own shocking about-turns and forced mea culpas. We can all relate. And the next 12 months look likely to see a far higher number of reversed decisions than usual. Now, more than ever, it’s worth reflecting on what a U-turn masterclass might look like for you.
In family life, tighter finances are leading to once-firm commitments being abandoned quicker than the proposed abolition of the 45p tax band. With housing costs rising and food and energy bills mounting, many affluent breadwinners have to tell their families that the planned holiday has been downgraded, the new car is being delayed, and the cleaner will only visit once a week. Ocado shares, down by over two-thirds in the past year, have been affected by value-conscious shoppers moving to cheaper alternatives.
Less fortunate Londoners are taking buses, rather than the more expensive tube, cutting out takeaways and cancelling Netflix. Kantor Worldpanel reported this week that the total number of UK homes with at least one streaming subscription fell by 937,000 since the start of this year.
Radical household changes are legion as economic reality sinks in.
It’s the same in business.
Just as the market impact of a weaker pound and higher interest rates has forced a policy shift from “growth that will pay for itself later” back to the “balance the books in the mid-term” orthodoxy for Liz Truss, so financial sentiment can cause a committed CEO to abandon a cherished Plan A and turn to a very different Plan B.
In company valuations, the paradigm has shifted from future growth to current cash generation. Until recently, many shareholders had been willing to back revenue growth as a proxy for value growth, at least in tech-driven companies where the returns would come, with scale built over years. But those days, which still existed this time last year, before whatever the latest variant of Covid-19 was and the Ukraine invasion spoiled the post-pandemic recovery, seem long-gone.
Now the focus is firmly on cash generation, rather than growing revenues. This is causing U-turns aplenty. For example, both the electrical retailer AO and the online Cazoo car dealer have announced radical exits from European markets in the past few months , which added to top-line revenue but were unprofitable. Other companies have risked suffering the Kwasi Kwarteng fate of virtually disappearing off the scene altogether as any U-turns have been too little, too late – Eve Sleep has been bought out from their receivers this week, while online furniture company, Made, is searching urgently for a buyer, with a share price down 95 per cent in the past year.
So, how to manage any forthcoming U-turns in your life?
Call out the issue. While it can be tempting to feel shame in a change in your strategy, try to summon your inner John Maynard Keynes, credited with saying: “When the facts change, I change my mind. What do you do, sir?” If your family or business finances have changed, verbalise it as the justification for a radical shift. People will appreciate the context.
Know, too, that when you are shifting your position, it can be worth taking the opportunity to slay a sacred cow or two. For the new chancellor, that could be the pension triple-lock or the two-year energy price cap. For a business owner, it could be closing an expensive flagship office or culling a committed project – what is your firm’s or family’s version of HS2?
Finally, if you are going to U-turn, it may be best to go “full Jeremy Hunt”. Many leaders would have seen his speech on Monday, in which he clearly rejected almost every aspect of the “Plan A’”mini-budget, as a standout exemplar of a strategic and radical pivot. Don’t smash into a major issue, play it down and then present only partial solutions. It didn’t work for Kwarteng, and it may not work for you.