The Government must hold firm on calls for state bailouts, well-run firms will stand on their own two feet
Source - Daily telegraph - 15/10/21
In recent weeks, a pattern has emerged in the approach of big business to the various post-pandemic convulsions in the economy. It goes like this: first, warn that the sky is about to fall in; then portray it, falsely, as a uniquely British phenomenon; finally, call for yet more state support, as if the Government hasn’t thrown enough taxpayer money at the economy already.
Do some of these people think that there is a magic money tree in Whitehall to prop up struggling enterprises in perpetuity? At what point do businesses expect to wean themselves off Treasury subsidies, and have they thought about how or when it might be repaid?
It is a deeply frustrating habit, enabled as ever, by the big lobby groups such as the CBI, Make UK, and UK Steel.
There is no denying that companies face some serious challenges right now. Supply bottlenecks, labour shortages, and spiralling energy costs make for a lethal cocktail for any business attempting to get back on its feet after the biggest economic shock since the 1930s Great Depression.
The latest apocalyptic vision comes from billionaire industrialist Sir Jim Ratcliffe, whose prediction of a widespread shutdown of heavy industry this winter when gas supplies run short, will pile further pressure on ministers to ride to the rescue.
But the awkward truth is that the recovery was never going to be straightforward despite some excitable projections of a thunderous bounceback. A period of adjustment was inevitable. And Britain is not the only country experiencing difficulties rebooting after lockdowns. Most of the headwinds are being felt from San Francisco to Shanghai.
China, the growth engine of the world economy, is battling power outages and even threats to food production. In America, there is a seemingly endless queue of container ships outside Los Angeles and Long Beach - the country's two biggest ports - waiting to dock and offload their cargoes. Across parts of Europe, growth lags Britain.
Endless dire predictions and an obsession with pretending that the UK's troubles are exceptional rather than the norm, are reminiscent of Project Fear. Many of those who failed to block Brexit refuse to move on. Instead of getting on with life, they prefer to leap on every setback as yet further proof that leaving the European Union was a grave mistake. It is disingenuous and depressing. The FTSE is blighted by group-think, with the various lobby groups, only too happy to blindly facilitate it.
Thankfully though, not everyone is dogged by the same malaise. Amid the doom-laden forecasts and cries for intervention, some companies are quietly bucking the trend, demonstrating that with sound management, deft maneuvering, and a bit of foresight, it is possible to ride out the storm.
Tesco has led the way, shaking off inflation and labour and delivery issues to report well-stocked shelves, well-staffed stores, and with a pledge not to pass on price rises to customers. There was even an upgrade to profit forecasts.
Boss Ken Murphy hailed it as proof that the supermarket juggernaut has “many unique advantages”. A company of its size is blessed with vast distribution capabilities and a sprawling supplier network. But Tesco is not that unique that others have been unable to take evasion action.
Dominic Paul, boss of Domino’s Pizza, said the take-away outfit had coped “despite well-publicised inflationary pressures and a challenging labour market”, so well in fact that it expects growth to be “sustained” and is planning to hire another 8,000 delivery drivers to meet demand.
National Express has avoided any damage from recent fuel shortages and price spikes by doing what any transport operator worth its salt should do and hedging. The company has enough fuel to last until some months into 2023.
Home furnishings chain Dunelm has managed supply issues and freight delays by keeping stock levels high, reducing seasonal ranges and persuading customers to substitute products. And budget retailer Pepco has promised to cut costs so that it isn’t forced to raise prices in-store.
The Government was right to step in at the beginning of the pandemic - without furlough, Covid loans, and grants for small businesses, the economic, financial and social ruin would have been vast but a lifeline for energy intensive industries would be different, harking back to the 1970s and “picking winners”, a wretched practice that hampered growth for years.
The pandemic bailout bill is already eye-watering. The deficit has sky-rocketed to a peace-time record of more than £300bn, or 14.3pc of GDP, and the tax burden is the highest its been for 70 years. In a market economy, businesses can’t be allowed to get hooked on handouts.
It is reassuring that the Chancellor isn’t convinced about the merits of yet another bailout, but he faces a battle with business secretary Kwasi Kwarteng and Number 10 who are leaning towards yet more aid.
The Government should hold firm. Well-run firms will stand on their own two feet and normality will return. Indeed Taiwan’s TSMC, the largest chip-maker in the world, has said shortages in some sectors are already easing. A bailout now would set a dangerous precedent. The first sign of another blip and there will be a queue of failing companies with their begging bowls stretching from Whitehall to the regions.
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