In a special edition of Voternomics, the former CEO of Legal & General Nigel Wilson urges the new UK government to be bold and act fast. He speaks with host Stephanie Flanders and Bloomberg Editor-in-Chief John Micklethwait.
Bloomberg Audio Studios, podcasts, radio news.
You campaign for it, you've fought for it, you've voted for it, and now it has arrived.
Change begins.
Now welcome to another special edition of the voter Nomics podcast, where politics and markets collide. I'm Stephanie Flanders, head of Economics and Government at Bloomberg, and I'm in Whitehall in the Old War Office, just a stone's throw from ten Downing Street. If you're much better at throwing stones than i am. The Conservatives just a review have been turfed out in a seismic changing of the guard in Westminster and across constituencies up and down the land, with Prime Minister of Is She's Sunak presiding over a record loss of around two hundred and fifty Conservative seats, Labor with a majority just shy of Tony Blair's landslide victory of nineteen ninety seven, and there will be a lot of other new faces joining him in Parliament, including many more Liberal Democrats, a clutch of reform and Green MPs will be very interested in five years time to see what the opposition, what kind of opposition the Labor Party is facing. But I think it's fair to say, for the first time in a long time, the world here in that the financial markets and in London but also around the world doesn't have to pay that much attention to the Conservative Party's travails, at least for a while, any more than they ever care about a weak opposition party at the start of a new government with a massive majority. So instead we'll be focusing here on Labor and markets haven't reacted this morning. You'll probably have seen, and I think con mentioned there's been no big change in the pound foot seats up slightly when it opened a few minutes ago, and that's obviously because it wasn't a surprise that the Labor Party had won. But I think you know they've been so cagey and so careful in the lead up to this, with their huge lead in the polls that they didn't want to lose. Then I think there will be plenty in the months to come that will be a surprise for investors and for the business community and for all of.
Us here up on the stage.
I have to help me thinking about this, think about this for the next few minutes. Bloomberg's editor in chief John Mikolfwaite and Sir Nigel Wilson, who was the chief executive of the insurer Legal in General for a decade before standing down last year, and has recently been appointed group chairman of Canary Wharf Group. So Nigel, let me come to you, because along with your business career, you've been quite public over the years about the factors holding back the UK economy and the shortcomings in government policy over this period. Do you seriously expect now that lay But will change things and what kind of advice would you give them.
I'm very excited because I think Kids done an amazing job to transform the party and win the election, and he's now got a wonderful opportunity because as I've always said, we've got an amazing amount of capital in the UK. We've got six trillion pounds of long term capital which has been hopelessly misallocated for the last twenty or thirty years. So they've got the capital already sitting in the UK to do all the necessary changes. Because we're always bottom of the G seven table in terms of the percentage of investment as a proportion of GDP, we could now move to near the top of it if we want to do that, And they put the policy and regulation in place, to drive growth in housing, to drive growth in sort out the water industry, their massive transformation on energy, and to build a world class venture capital and scale up businesses in the UK. So I'm very excited about the prospects because kids done a great job in Phase one, which I think is the easiest.
One, is winning the election.
Verse two is actually coming forward with some not KG policies, but some real credible policies about how we're really going to grow the economy and use.
All the private capital and all the.
Private expertise to drive that growth, and then be very supportive next year in actually making sure that capital gets spent and the government acts in a very bald and aggressive way that they haven't done for a very long period of time to really drive change. Don't just talk about change, You've got to make change happen. So I think they are listening. I've had lots of indeed some private sessions with kir on this, and I think they're up for doing this. This could be nineteen forty five, a transformation of the economy going forward, a modernization of the economy going forward, and really really delivering and making people happy again about the terrible lack of growth that we've seen since two thousand and seven. How far behind we've fallen against the best amount of competitors.
Well, just to follow up on that, I mean, I think you know people would often people outside the world are surprised that we have a world leading financial sector, that it's so good at deploying capital, But historically, for more than a century it has been bad deploying it in its own country. We just haven't we haven't seen it go into the kind of private investment. And as you mentioned, twenty four of the last thirty years we've had the lowest rate of investment in the Group of Seven, and we're about twenty eighth out of thirty one countries in the OECD.
So when you talk.
About Takirstama, the incoming prime minister knows what's at stake and knows some of the key leavers to pull.
What are you.
Focused on on planning restrictions on house building? Where would you see it?
I think all of these things are integrated together, because I think once you start delivering change and people seeing things happen, then you create that immersing positive momentum. They've done it in the election. I think they can do it in the economy as well, because the numbers that you caught are often the ones that I qued as well. We have this massive potential. There's six trillion pounds of long term capital. There's three trillion in the pension fund industry, there's one and a half trillion in the insurance industry, seven and fifty billion sitting in various serving schemes, and isis have seven and fifty billion as well. That's six trillion hopelessly deployed. And we got some of the cleverest, best bankers in the world, and as you said, they're world leading. We now have to get them working with industry and actually under the sponsorship and leadership of the government to really make a difference and planning. Initially, they've got to use the powers they already have, compulsory purchase orders, call in rights, and then put in place legislation which allows them to really drive growth in the energy industry and the housing industry, in the water industry, but also in all these amazing scale up businesses that we have across the UK. So they actually do scale up. They do ip R here in the UK, and we look in two or three years time and say, wow, all these amazing things have happened here in the UK.
I think is that we all know planning is one huge area where things could change dramatically. The other gigantic one is Europe, which you didn't mention that bit like Karma is not mentioned or he's tried not to mention it. But if you were looking just from a straightforward economists point of view about how to grow the British economy, a new deal with Europe and one which went perhaps quite close to a customs union, perhaps is that the other the other lever he.
Could pull in order to get these things happening.
Yes, I think that's an excellent question, and I would agree with everything you said that John, that it's something we should be doing. There's a bit of chills in Europe at the moment, and we've got these domestic priorities where we can actually deliver on them without wasting too much time literally next week they.
In order to get the most growth out of Europe to start.
I mean, I would be in favor of a customs union, but clearly that's not the position that here and the rest of the team have right now. But actually the get momentum in the domestic economy that will create confidence and actually going forward and developing a much firmer and better relationship with Europe, which I think we would all cheer for.
I guess the pushback to some of this optimism, although obviously it is exciting and it's great to hear the kind of confidence and the optimism in your voice, Nigel. The just two things that we've identified that could make a difference. Are there just two things that have caused the most problem for you successive UK governments? Pushing through difficult investment projects or big infrastructure investment. Redeploying capital in the in the savings industry. I mean, people have been trying to do this for many years, many including Jeremy Hunt, have talked about it, and equally Europe has has just sucked so much time and political capital over the years without necessarily you know, it's going to would take quite a lot for this incoming government decide to deploy it there. So isn't that the chat. The two things that we've talked about are actually incredibly hard and they could look very bogged down very quickly.
I think that's not going to be the case, because certainly I'm I'm very pleased by the way that Jeremy kept his seat because he did a lot of work on pension reform. He's a really good person and he stood up when we really needed somebody to stand up. And I think Rachel's going to be the same is that she's going to try to make things happen and at pace. And so we know what the past look like, we don't want to repeat of that. Therefore, we've got to really drive change through very very quickly. And there are so many easy wins. You know, there's a stock of housing projects just stuck in planning, and you can accelerate that. It's a choice you can select whether do we go faster U s law. We all want to go faster on things like that. And once that starts happening, doors lead to doors, and we'll see more good things happening right now because there's there's a good will towards the party.
Are you so confident these things are going to happen because you're going to be in charge of doing them.
You have been talked about as.
I'm certainly very close to lots of the mayors across the Believer and Devolution, and indeed I'd already set up some meetings post the election to talk to them about what else we can do to accelerate the growth, be that in Newcastle or Sunderland.
But if Takia calls up in a few hours, I said, you know what, I.
Think he's got bigger issues to worry about than what I'm going to do for the next few months. But he's going to He's got a good team around him, and that team's talked up their capability. Now they have to deliver on that capability. And they've got the money. And as you're right you said, we've got a brilliant financial services sector, almost the envy of the world. We're brilliant in Pe, We're brilliant in VC. We've got tons of savings, We've got masses of great banks here in the City of London. We've got huge underinvestment. As you pointed out, for the last thirty years, there's so many easy wins make them happen.
If I was you imagine you did get that job, I would be rather worried by some of the seats.
That labor is just one.
You know, all these things like Uldershot, These are all the places where the Tories have faced endless problems over planning because people object to it.
They don't like it.
There's that film studio in Theiamalow which even people like Georgie Osporan say it's insane not to build it, the three thousand jobs, two hundred acres, but because it's just on the edge of the green belt, people don't want it. You are now going to have in Labor a group of MPs which never had before, who, after a few hours of self congratulation, they're stunning and face to the prospect. They've got constituents who don't like new houses. There could be another wing of the Labor Party which actually makes life more difficult than easy for all the things you want to do.
I think that's a possibility.
But you know, when I was at Legal in General, we did the sky studios at Elstree, which is in a not quite the green belt, but in an area that was difficult to achieve planning on. But once people see these things and they become up and running, and you can take people across the country and say, look, this is what happened here. This is the outcome. Don't be fearful about it. This is the rights of our children to have housing. You know, our generations stolen from our children by not giving them their housing, by charging for god to universities, by not giving them good pensions, all the things that we took for granted. We have to replace them by doing a better job for them going forward in educations on that list as well, which I know you feel very strong.
In a minute, I want to get onto sort of pulling back of the lens in terms of where this victory, what it looks like in a global context, and what that means for kirs Arma as a new prime minister. But I guess you know, for the audience that is the business community, for investors around the world, very important to get stability, and I think that is why there was confidence around this. There was a positive reaction to this, just the prospect of a five years stable majority government, the good things that they might do that we've talked about to unlock investment and growth. But of course with any labor government, you also have the question of what bad.
Things are we hoping they don't do?
And you know, one query has been given that they're not going to have very much money to play with. What often then happens is that you change laws instead of spending money, because you can do sweeping things by changing, for example, employment law, maybe eating away a bit at the sort of flexible hire and fire structure of the UK in ways that have unexpectedly quite negative effects for growth and for business confidence. So how worried should people be about that? Because that was where there was a bit of detail in the manifesto.
Yeah, I agree with that, and I think that's what's happened over the last thirty years. We made all these marginal decisions which look when you're making them as though they're positive, but actually when you look at the second order effects and the unintended consequences have been very negative for the overall economy and people's thinking about what a great place the UK is to invest.
That's why they have to have some wins on the positive growth story.
So they're definitely changing the narrative, but not spending all of their time causing things which are a problem for business.
Is there anything in that manifesto on that front that you would worry about?
Well?
I think everyone, Yeah, I forget.
The worker's rights issues are going to are going to be an issue that people are going to have to be concerned concerned about, you know, and it's not going to be plain sailing giving the composition of the of the Labor Party, and that is a risk, that is definitely a risk. So you're right to highlight that as a as a risk. And I've been on the other side of that where I've been overly optimistic about things and then got just really let me down again.
And that's happened so much in the so much in the past.
But I think the towns and the cities across the UK have very capable people.
In them now as well.
The banks themselves have moved to Birmingham, to Leeds, to Manchester, to Newcastle, and that's having a difference because suddenly capital is on tap, ambitions on tap. The mayors themselves are very ambitious people and very capable people.
That is clearly going to be the ultimate test.
They've talked a lot about decentralizing, and I certainly with someone who thinks, I agree with you that it's the best way now given where we are to make things happen, is to be devolving more power to regions and to cities in particular. But whether you know, so many governments say that and then they get power they don't want to relinquish it, so we'll see what happens. John, I think, you know, you're someone who is flitting around the world quite a lot while we do all the work, she says, And I flicked It was not a surprise in the UK context at all, and it comes after fourteen years of conservative rule. But in a global context this is completely out of step.
I think this is a big deal globally. I think that if you step back spect those of us who deal with America a lot, we'll get a lot of calls. Later next week, You've got the summit where star War will go there, and suddenly this man who is describing was was you know, rather it seemed like a rather marginal figure in world politics, will suddenly be one of the most powerful people, notwithstanding the fact the kind of basket case nature of Britain in many ways. He will appear and he is the one person next week who will be able to say, look, I'm here for the next five years. You look around the rest of the world. You've got Joe Biden, for whom the weekend maybe a long time.
You have.
Macron, who is in severe trouble. I love Schultz has also got issues. And from that perspective, you've got Keir Starmer, a very good Greek prime minister, good Italian primi or Italian prime minis who's doing quite well. That Starmo is going to be right at the very center of things with a degree of longevity, and I think that is actually really quite a big thing, and especially in the context of what's happening in other countries, and that degree of permanence is a very strange thing. And then secondly, he will be able to say, look, I'm the person who's managed to resist or at least in theory, I've managed to resist these sort of nationalist currents which are happening elsewhere. And yes, people will come back at him and say we'll reform did well that that is not the same as what's happening in Paris. It's not the same as what's happening in Germany. And if you factor Donald Trump, and it's not not the same as what's happening in America. So there will be I think, amongst what might have describe the center ground of politics, there will also be a degree of Starmerism. So I completely agree as I indicated, but that with the massive problems. Starmer's got here, but actually in a weird way, you know, he's on the international stage. I think he is the first person since kind of Cameron or possibly Blair to have that degree of clout when it comes to the it comes to the world politics.
I mean, I guess we don't know what's going to happen in France, will find out on Sunday night. But to the extent as you say, we have the German Chancellor, French President Macron very much on the back foot, potentially President Biden as well. I guess there is danger though that they've invested all this time in roose relationships that are not really going to be worth very much and they're not going to be able to provide things that labor or that the UK needs. So is that that that's the downside?
I think there is.
I think one of the problems which Nigel alluded to is that the obvious thing. I think if all three of us, to make a terrible presumption, were put into Downing Street, I think redoing the relationship with Europe would be that is the simple, easiest way to get the growth that Britain needs, and that nothing none of the wonderful things that you may not be wonderful to everybody.
The things that labor wants to do are going to be.
Really possible without growth because you have the guilts market sitting there looking at government spending. But the problem is you go to Europe and it's a mess, and so the idea that you know, Starma can immediately get some.
Degree of deal there.
I think, you know, if I was Starmer, I would still try and do that rapidly because I think it has two amazing effects for Starmer.
Number one is it increases British growth.
Secondly, it really skewers the Tories because it probably pushes the Tories into a position where they oppose no matter what happens, whatever deal he does come up with, And I think when he does, if they do that, I think I'll make a terrible presumption again about the nature of the people in this room. But I think the commercial classes in Britain, if the Tories again push themselves into a thing where they really limit growth, I think that would be a very serious thing for the future of the Conservative Party.
I mean, if you look sorry, and I.
Think we can change investor perception.
That's the other thing One of the points that John's just made is that because this will have financial and political stability for the next five years, this is a.
You know, I've got a conscious buiers.
I think London's the best city in the world in the UK is an amazing class to invest and we've just underinvested it in it for such a long time. Investor perception is going to change. The Conservatives did a really poor job of country management across the across the world. We have an opportunity to put a lot of that ride right now, and there's tons of money elsewhere looking for homes the world to wash with cash and capital at the moment, and we should be telling people this is a great place to come and invest that money because you're going to have the political stability and economic growth agenda here very poor business and these are great cities and towns to live in.
We're going to run out of time in a minute, but I guess I had had two more words to ask you what your feelings were. Industrial policy, you know, we've had that's one of the ways in which the world has actually moved left in recent years in terms of economic policy, much more interventionism. Rachel Reeves has talked about Bidenomics without the money, or I guess she's not talked about it, but what she said has implied Bidenomics without the money because we don't have the kind of scale of trillions that the Biden administration has been able to put into things like the Inflation Reduction Act and Infrastructure program. But we may have bidnomics without President Biden as well. But that's a whole other issue. But do you kind of have a natural kind of watch your wallet response when you start hearing about industrial policy? Do you worry about competition in that context?
How do you? How should one should one welcome that?
I think we should welcome it because that's I think there's going to be an engagement around what the industrial policy should be because they've been actively listening for us for a very long time time and that's been very, very positive.
And there is just just this huge gap and we have the capital.
You know, as John mentioned, public finances are very constrained and will find out just how constrained there is when they do their due diligence starting next week.
Private sector capital is huge.
The personal financial sector in the UK has a very strong, massive excess service, really good shape. The SME is in Britain one hundred and ninety billion of borrowings two hundred and fifty billion of deposits right now. So there's huge headroom for growth in the UK, but you have to have that confidence to invest, and I don't. We've had either the planning, the regulation, the policy, the tax situation which is really encouraged investment. I was talking to the Tartar Group about their investment in their the battery factory yesterday and Chandra is one of the most visionary leaders in the in the world and they're going to make that happen and seeing is believing. The envision one up in Sunderland is absolutely fantastic and if people get out and see what's happening.
And that, you know, the early green shoes.
Per job is extraordinarily high.
Though I think that's a short term view and I think the doors lead to doors, and we filled when we built the original nissunfactory. We haven't really done very much since to build the supply chain. We have to build supply chains in the in the UK in part to trade bede.
Here we face this fundamental problem is that we decided I'm not exit is not the main issue, but the basic factor is just at the moment when the world stopped being global, when it went to regional trade blocks, we are the people outside. And when you talk about industrial policy that the comment about you know, Bidenomics without without the money is you sit in anything and you look at Biden spends a trillion on green industry, and if we get twenty million, we think we're doing really well.
It's we could do over one hundred billion pounds of investment per year for the next ten years just with the private sector money and now absolute confidence that all the projects are there, absolute confidence in the financial services sector to actually deliver, deliver, deliver that capital, and the economic growth that we'd get out of that would actually in five years sort out the public finance problem.
Isn't that interesting though, that your version of labor, which I think most people in this room would definitely support, that could end up being a more free market version of the left broadly than what's happening in America, what's happening in other places.
We're going to end, but I want to just grasp both of you just one sort of simple question that comes out of the way. This majority was one and actually it's a historically very small share of the vote for an extraordinary majority. I think it's the lowest ever share of the vote for the highest ever majority. So there's been a very sort of softly softly approach leading up to this, and even with this symphatic win, maybe some nervousness about how solid some of these seats are. Do you think Kirs Starmer both of you, do you think Kirs Starmer is brave enough to really move the dar over the next few years and then the next few months.
I think he is definitely brave enough to do it.
He needs his other members of the cabinet to be bald and brave and he actually use the powers that they have to really start to build momentum around economic growth, because whilst public finances appear, as John mentioned, the rest of the economy is in pretty good share, and we.
Have a lot of a lot of really good capable people who are now in positions rather like you.
I think devolution is a great idea and we should be doing more of it rather than let less of it, and really really build up that our great cities outside of London as well.
I think intellectually Starmer is in the right place in terms of the things you're talking. I think the emotional side of it. The bit I worry about is that his whole record is one of on the whole is gradualism. You know, he comes in, he changes things. Look at what he's done to labor. It's an amazing feat. But he didn't do it all on day one. And the slight problem is when you when you go into government, that is, as you know, it's a different challenge. You suddenly get thrown things. So you have to make big decisions and you have to try to do them as early as possible because political capital.
Is a bit as George W. Bush what said, it is like an iceberg in the desert. It it evaporates.
And I think the more stuff that Starma does early, you know, Blair tragic, lamb old enough to remember that Blair came in and he did a lot of things straight away. And that's where we're getting very good indication of how bold Starma really is.
I think quite soon watch this space.
Well, we have managed to talk all this time without talking about really talking about the public finances or where the money is going to come from. But we spent so much time talking about that over the last few weeks, and I know there'll be plenty more discussions around that, so I'm very happy to have had this quite optimistic and quite detailed micro look at the challenges ahead for this government and whether they're.
Up to them.
Thank you for being here for our recording of Voter Nomics from the Old War Office in Whitehall as part of this bloomberg UK election of twenty twenty four.
The debrief.
Thank you to our guest John Miiklfwaite and Sir Nigel Wilson, and all of you listening and sitting here. Please do subscribe to voter Nomics wherever you listen to podcasts or indeed listening to panels like this one.
Thank you very much