WHETHER or not Prudential is overpaying for AIG’s Asian operations remains to be seen. Shareholders, spooked by the prospect of Britain’s biggest-ever rights issue, sent the Pru’s share price tumbling yesterday. But what is not in doubt is just how important Asia is becoming to Britain’s most successful and ambitious companies – and just how risibly inadequate the British government’s response to this monumental shift has been.
The contrast between the decline of contemporary Britain and the growing attractions of the Far East were all too evident yesterday. HSBC’s profits were powered by its Asian operations; the bank’s boss, Mike Geoghegan, has already relocated to Hong Kong. He is constantly criticised in Britain, even though HSBC didn’t need rescuing and prudently lends out only 77.3 per cent of its deposits; yet he was feted as a hero in Asia when he moved there a few weeks ago. Today, Standard Chartered, another UK-based giant, will announce good results powered by its own Asian operations.
Back home, meanwhile, the picture is grim. Sterling tumbled yesterday as traders feared a hung parliament, gilt yields shot through the roof (it now costs more for Britain’s government to borrow than it does Italy’s, a humiliation if ever there were one) and a mood of despondency swept across offices. Even after this morning’s YouGov poll showing that the Tory lead has bounced back from just two points on Sunday to seven, it looks increasingly likely that we will be saddled with no overall majority in the House of Commons. This will rob Britain of a strong government at a time when one is desperately needed. The national debt is spiralling out of control, requiring urgent and huge spending cuts.
If you are a UK firm with growing Asian operations, you will inevitably start to wonder whether you shouldn’t go the whole hog and move your HQ closer to your main market – and to somewhere where enterprise and making money isn’t frowned upon. Tidjane Thiam, Prudential’s multilingual new chief executive, is used to moving country; he spent time as a government minister in Ivory Coast, studied and worked in Paris and now lives in London. He has no intention of relocating – but if the climate in Britain continues to deteriorate and taxes keep on going up, nobody can predict what might happen. Unless the UK reins in its oversized state and does what it takes to boost its competitiveness, Britain’s economy stands no chance. It’s time to get real.
Forty five years ago, there were just 18 government economists. Today there are nearly 1,600 working across the civil service. Most are microeconomists producing “research” of the sort which allowed Harriet Harman to claim that her Equalities Bill will create benefits to the economy worth exactly £498,996,319, an absurdly precise piece of nonsense. No wonder our economic performance has failed to improve and the public services suffer from abysmal productivity.
Paul Ormerod of Volterra Consulting is proposing in a Centre for Policy Studies report that 1,000 public sector economists should be made redundant to root out the technocratic and mechanistic approach to policy of the Labour years.
There will be howls of protest in Whitehall; but unless civil service economists start to add real value, they will make easy targets for those seeking easy spending cuts. firstname.lastname@example.org