Politicians are slaughtering UK finance – the goose that is still laying the golden egg
OVER recent years British business has withstood many onslaughts with quiet stoicism, but the latest politically inspired witch-hunts against financial leaders seems to have finally broken the camel’s back. The unpalatable truth is that politicians of all parties, in their selfish efforts to bolster their personal election prospects, have delivered a savage wound to business development in the UK.
The shallowness of our current political masters was so clearly and unambiguously exemplified by the unedifying sight of David Cameron and Boris Johnson talking about welcoming French financiers with open arms, in the event of the imposition of a Gallic Tobin Tax. We recall that last week they were jumping on the “bash-a-banker” bandwagon. Frankly, if I were sitting in Paris I would prefer to tough it out rather than move to the UK and suffer the incessant tirade that business leaders are exposed to over here. In attempts to appeal to the educationally challenged, our political masters have imposed ever more stringent terms on the financial sector, terms that would be considered completely mad if they were inflicted on any other business community. While the financial sector is no doubt highly paid, it also brings in billions of pounds every month to the UK. This is effectively free money, for which we pay a cost called risk: billions of pounds, for which we only have to lend the UK’s stability, expertise and knowledge, rather than build vast manufacturing units across the landscape. The UK happens to be good at finance and attracts the best from all parts of the globe because it is seen as such.
The City is the key weapon in the UK’s anti-recessionary arsenal. For it to function effectively there needs to be an element of public and political support – yet, rather than seeking to administer a shot in the arm of UK business, the coalition instead appears dead set on giving a lethal injection, by scoring easy political points via the tawdry medium of pointless mudslinging. Whatever one’s opinion of Fred Goodwin, making the stripping of his knighthood a political priority only underlines the paucity of the current administration’s policy for business. Surely building public confidence in the City, ensuring we have a robust – and fully practical – regulatory framework, and giving clear and unequivocal backing for the UK’s financial services industry in the face of Brussels-based ogres (such as the financial transaction tax), are more pressing issues for the chancellor and Vince Cable? I fail to understand how the de-frocking of the erstwhile Sir Fred will achieve anything other than prompt another round of futile anti-big-business bile. Business is the easiest animal to kick – the arts and the fourth estate, whose representatives include convicted criminals Lord Archer and Lord Black, are notably absent from this particular trend of title-stripping. The problem is that if it is kicked once too often, the business beast will flee the house – in this case probably for Hong Kong, Singapore or Australia.
The Germans are among the best in the world at manufacturing, so could you imagine the German political elite damaging their top businesses as we do here? While we all hear of Mercedes and BMW we are largely not aware of the myriad of Mittelstand companies in Germany, mainly family owned, who are considerably wealthier than anything we see within the UK banking sector. In addition, they are not squeezed into one small square mile, but spread out across the whole country. Business policies put forward by politicians in Germany are designed to promote the well-being of their main earners, manufacturing. Virtually every utterance from our political masters seems designed to do the exact opposite with our own top sector.
The actual money used to “bail out” the financial sector does not even amount to ones year’s worth of benefit that the UK derives from having such world leaders in our midst.
Of course, we all wish that the UK could return to being the “workshop of the world”, but this will not be achieved by smashing the one thing in which we are world leaders.
Our secretary of state for business, Vince Cable, seems to have misread his job description. The basic fact is that people go into business to make money, people invest in companies for them to make a profit so that they can be paid a dividend and (hopefully) for the value of their investment to go up. In the main entrepreneurs are not altruistic members of society – although many become so later in life.
In the case of my own company, for every £1 eventually declared as a profit and then paid out in dividends, the UK state will have taken 66.8p in various taxes before it gets into the bank account of an investor (if the recipient of the divvy is a high-end tax payer). It is not individuals who are guilty of greed and irresponsibility, it is the state, which continues to grasp and grab. And to add insult to injury they then smear the people whose pockets they have just picked.
The current economic woes of the UK and Europe are nothing to do with businesses, business leaders and actually little to do with banks either. They are almost entirely to do with politicians and their never-ending desire to spend any amount of other people’s money to retain power.
Simon Denham is chief executive of London Capital Group.