In my Money Week Column this week, I've been arguing that the British government needs to start learning how to stand up for British business. Here's a taster....
The rhetoric has been disgraceful. Over the last month, as oil spilled out into the Gulf of Mexico, President Barack Obama has been harassing and condemning BP as if the oil company had planned the spill from the start. The U.S.’s own role in creating the crisis – by completely refusing to control its own oil consumption, and by insisting that more of its energy is supplied from within its own territory – has been glossed over in a series of anti-foreigner tirades.
But the response hasn’t been much better. The Prime Minister David Cameron and the Foreign Secretary William Hague, have been about as firm as a lettuce caught in a thunderstorm.
In reality, the British government has completely forgotten how to stand up for British business. BP is the latest, and most glaring example, but it is far from the only one. Shell was treated disgracefully over its oil interests in Russia. Mining conglomerates such as RTZ are being picked on by the Australian government. Cadbury received precious little support when it was targeted for a hostile bid by Kraft. No one believes the UK has to embark on a French-style policy of economic nationalism. But it is worth recognizing that business and politics are increasingly intertwined. And the new coalition government should start re-learning the art of quietly helping this country’s companies.
BP hasn’t been called British Petroleum for years, but you wouldn’t know that from listening to Obama’s rhetoric over the past month. Of course, the spill in the Gulf of Mexico was a terrible accident, and the damage to the Gulf coastline a tragedy.
But it absurd to pin all the blame for this on BP, and it is deceitful to pretend that it is the fault of a foreign-owned company (particularly when BP happens to have as many American shareholders as it does British ones). In two respects, US policy is directly to blame. The Americans remain by far the largest oil consumers on the planet, both in total quantities and per capita – in case you were wondering, the US consumes 20 million barrels of oil a day, compared with the next biggest consumer, China, which manages to get by on 7.5 million barrels. On top of that, US policy in the last five years has been to source more of its oil from its own territory, rather than shipping the stuff in from countries that are a long way away, and which it doesn’t like very much.
If you want vast quantities of oil, and you want it from US territory, there is no point in complaining when the energy companies start drilling for the stuff in more and more environmentally sensitive areas. BP’s contractors shouldn’t have allowed the oil to spill. But it was the Americans who wanted them to drill there in the first place.
The British government, however, hasn’t been making those arguments. Nor, over the most of the last decade, has it been prepared to stand up for British companies.
The Anglo-Dutch oil giant Shell was largely driven out of its investments in the Russian energy industry by that country’s government, which was determine to re-claim control of the oil industry. Did the British government have anything to say about it? Not a word. The Australian government is proposing a punitive new tax on mining companies, which will hit hard British-based companies such as RTZ and Anglo-American. Has the UK protested about that? If so, not in public. When Cadbury was attempting to fend off the hostile bid from Kraft, the best the British government could manage was a few limp words from the them Industry minister Peter Mandelson. Why not call together the leading shareholders, and remind them that if this wasn’t a British company worth backing then it was hard to know what was? But it couldn’t even stop the state-owned Royal Bank of Scotland from lending money to Kraft. Crazy.
French-style national champions wouldn’t work in the UK. We don’t have the kind of industrial-financial elite that moves seamlessly between government and big business. But it is hard to imagine that France’s President, Nicolas Sarkozy, or the German Chancellor Angela Merkel would stand idly by and watch French or German companies get pushed around like that without having anything to say about it.
One problem, particularly with the last Labour government, was a cultural cringe. A generation of left-wing politicians felt uncomfortable with anything to do with big business. And they felt equally uncomfortable supporting anything with the word ‘British’ attached to it. Backing FTSE companies simply wasn’t the kind of thing they did.
Another issue was the divorce between big business and politics. Most of the political class are now full-time, career policy-makers. They move from university to research jobs, to Parliament, and then into government. Very few have had any experience of industry, or how tough it can be. They don’t know how industry works, or how government can help. That is as true of the Conservative Party as it is of Labour.
And yet, in reality, business is getting more and more political. Environmental pressures mean that in the developed markets, companies are likely to have to face more regulations, more legal fights, and more lobbying from campaign groups and governments. In the emerging markets, where just about all the growth will come from over the next decade, the boundaries between government and industry are wafer-thin. Sometimes they hardly exist at all.
British businesses deserve more help and support from the government. BP would be a good place to start. But regardless of what happens to the oil company over the next few weeks, the government should start re-learning the skill of getting behind British industry – because without strong, global companies, there is very little chance of the economy every recovering.