Mark Kleinman: Joined-up government? Not on this evidence
Mark Kleinman is Sky News’ City editor and the man who gets the Square Mile talking in his City AM column.
Joined-up government? Not on this evidence
How about this for joined-up government? The chancellor of the exchequer until a couple of months ago corralled the City this year into an expensive industry-funded campaign to promote the virtues of investing in the stock market. Fast forward a few months and her successor’s colleagues are presiding over a bid to prevent the very same investors exerting influence over the governance of the companies into which they’re now ploughing their savings.
That’s a rudimentary, but far from inaccurate, way of interpreting a consultation document on modernising corporate reporting published this month by the Department for Business, Innovation, Science and Trade.
The collapses of BHS and Carillion were supposed to have been a turning point in the quest to sharpen the tools needed to hold company directors to account. Instead, there have been years of delay, undelivered promises and, ultimately, complete capitulation.
Now, the pendulum in Whitehall appears to have swung to the other extreme. The proposals to permanently allow virtual AGMs and abolish the requirement to hold annual votes on directors’ pay are entirely misconceived, and will have minimal, if any, benefit for companies which are well-run and properly governed.
Take this sentence from the consultation document as an example: the government is “considering whether to remove the requirement for an annual vote on the directors’ remuneration report, given that remuneration policy is already subject to a vote on a triennial basis”.
The official who wrote this has clearly not been paying much attention to what’s been going on in corporate Britain. If anything, the level of pay protests taking place at AGMs suggests that annual, currently advisory, vote on remuneration reports should be made binding too, rather than scrapped altogether.
This amounts to a rogue directors’ charter to ride roughshod over the views of those who own companies, which will inevitably lead to poorer decision-making and more corporate failure.
Anyone needing evidence of the lack of coherence contained in the rush to provide a veneer of pro-business sentiment from a government otherwise desperate to tax anything that moves should look no further than this.
South East Water bond delay is alarming for industry
Depending on which day it is, it’s not entirely clear whether Andy Burnham really believes Britain’s politicians shouldn’t be in hock to the bond markets. But if he wants another reminder of the implications for financial markets of government obfuscation, indecision or just downright incompetence, take another look at the troubled water industry.
Largely owned by overseas pension funds and infrastructure investors – many of whom, to be clear, have profited handsomely from their holdings in the sector – the industry’s ability to secure new funding is rapidly being called into question.
That’s the only conclusion to be drawn from South East Water’s decision to abandon a £200m bond issue last week, just days after it began being marketed to investors. Those familiar with the proposed deal say the feedback was consistent: the political and regulatory risks associated with the industry are now too onerous to ignore.
Some of those concerns are clearly specific to South East Water. The company may have parachuted in a competent and well-regarded chief executive in the last couple of months, but its recent history of supply failures has left it second only to Thames Water in the hierarchy of Britain’s most troubled water companies.
South East Water, which is part-owned by NatWest’s pension fund, is not at immediate risk of collapse: it raised a £200m liquidity facility earlier in the summer and has a separate backstop facility in place too. But its ability to meet its investment obligations will clearly be challenged if investors are unwilling to commit to its long-term debt issuance programme – proof that Labour’s consistent failure to meet its own deadlines for clarifying its vision for the water industry is having real-world consequences.
Battle for £1bn Scale-Up Fund hots up
It’s turning into quite a contest. The race to manage Britain’s new £1bn Scale-Up Fund, seeded by a group of pension schemes, has drawn interest from across the City.
In one corner, venerable institutional investors such as M&G Investments and Schroders; in the other, venture capital firms such as Molten Ventures which holds stakes in a string of companies fitting the scale-up moniker.
Tech industry figures have denounced the inclusion of big City institutions on the shortlist. “We want the fund to be as high ambition as possible, and to do that we’d want a truly risk-taking manager who will take big swings,” Dom Hallas, executive director of the Startup Coalition, told me.
With a verdict looming imminently from the British Business Bank on its choice, I understand other names are also in the mix.
Gresham House, which has about £13bn in assets under management, is one of them. People close to Gresham House say its expertise in technologies the UK wants to scale – such as quantum, AI and autonomous technologies, means it would be well-placed to identify the companies worthy of the £1bn pot of cash.
The prime minister has already made the dubious claim that the Scale-Up Fund would “help unlock good growth in every postcode”. That £1bn is going to have to work extremely hard, whoever’s managing it.