Without securing our trust, public and private leaders will fail our economy
As we head into winter, with the prospect of more restrictions at a time when trust seems to be in freefall, we have all been reflecting on how this is going to impact our communities and how we can use the opportunity to make the economy work better for all.
The first few months of the Covid pandemic saw billions pumped into the economy through stimulus. That saved millions of jobs, but it also widened inequalities in education and income. It accelerated years of digital transition and expedited a decade of social change as we started the discussion about flexible working.
The past two years have fundamentally changed the relationship between the state and the private sector. We saw unprecedented state support to protect thousands of businesses, but we also saw the role of business expand as companies and communities came together to solve problems the state couldn’t, like food deliveries to the vulnerable.
These questions are not new.
When the pandemic arrived in 2020, we were already thinking about the structural challenge of an economy that wasn’t doing enough for too many. This affects us all. When people think the system is tilted against them, they feel detached and trust corrodes.
Corrosion of trust makes us all worse off. There is a reason that countries with higher levels of trust are better off, because trust drives growth. Businesses are willing to make more risky long-term bets that may pay dividends far in the future. Employers are more likely to invest in their employees, and employees are more likely to build skills if they think they will be fairly rewarded for their efforts.
Yet trust, or fiat as the currency dealers call it, underpins our whole society, not just our economy. It’s what turns individuals into a community.
All this means that leaders everywhere should be asking what we can do to rebuild trust. We can all do better. As we have seen in the pasttwo years, businesses play huge roles in our communities, and leadership matters there too. There has been a lot of emphasis on the ‘E’ in ESG this year, but much less on the ‘S’ and ‘G’. But social and governance elements of business are just as important.
Companies such as Timpsons and Greggs exemplify a different model that promotes cooperation, not just competition; one where the private sector is about more than profit.
The best business leaders see a much bigger picture than the bottom line. Timpsons is now one of the largest employers of ex-offenders in the UK. There are some 10 million people in the UK with a criminal conviction; many used to be locked out of the labour market. James Timpson has changed that with a business that is strengthening the fabric of society; it’s no surprise that it is also profitable.
That profit is a product of everyone’s effort, so ownership matters too. Giving staff a stake in the company ensures their voices are heard. The benefits are mutual. Companies with a strong employee ownership scheme, like Tesco and Greggs tend to benefit from more productive staff, with a higher retention rate. That’s probably because of the intangible benefit that’s much harder to measure: employees taking more pride in their work, and firms feeling a stronger obligation towards their employees.
Despite there being 1.4 million firms in the UK, only around 13,000 offer some sort of employee share ownership scheme, according to the Social Market Foundation. That’s a growth opportunity for everyone.
We need to do more to promote employee ownership and profit sharing. That’s the real route to higher productivity, avoiding the inflation trap we risk today. It encourages leaders to invest more in their employees, and employees to do more.
Profit has motivated millions to success and powered prosperity and innovation in the UK; it has lifted billions out of poverty and transformed opportunities for everyone.
Now we need a new economic agenda to help leaders motivate everyone and deliver for our communities.