Why Britain needs long term thinking
L&G boss struggles to fathom how main parties plan to forge change
As a champion middle distance runner, Nigel Wilson has a good claim to being the fastest FTSE 100 chief executive on two legs. But when it comes to investment, he likes to take things slowly.
The outspoken boss of insurance giant Legal & General is a tireless advocate of ‘slow money’, or very long-term investment, which he sees as the antidote to the quick profits mentality that held sway before the financial crisis, at the banks and beyond.
Wilson has been using L&G’s multi-billion pound balance sheet to invest in UK plc, ploughing into urban regeneration, private rental accomodation, student housing and retirement homes.
Projects include a 50pc stake bought for an undisclosed sum last month in Media City, at salford Quays near Manchester.
There is no shortage of critics ready to line up and accuse the City and big companies of being obsessed with making the biggest possible return in the briefest possible time. But Wilson believes political short-termism is also a serious blight on the UK economy.
‘It is sad that it is,’ he says. ‘It is partly to do with the growth of the focus groups as a means of determining short- term policy.’
He says real political and business leadership ‘hasn’t really happened’ so there has been a lack of determination to set aside short-term advantage in favour of ‘doing the right thing’.
He adds: ‘I don’t think business has engaged in a lot of these big issues so therefore we can’t complain.
‘ For 30 years we never engaged in debates on infrastructure, housing or education.’
The ferociously intelligent Wilson is not cut from conventional chief executive cloth.
A north-easterner who hails from Darlington, County Durham, he appears to have a genuine empathy with ordinary people that eludes some of his counterparts from more privileged backgrounds.
He jokes that his wife and five daughters also act as a corrective if he starts showing any signs of self-importance.
He is also outspoken compared with most of his business brethren, who usually refrain from criticising politicians for fear of retribution.
In common with other leading figures, as well as fund manager Neil Woodford, he is highly critical of Labour’s energy policy.
‘We have the Labour party saying that somehow every customer in Britain is being gouged by the energy companies,’ he says. ‘I disagree with that. It is creating such uncertainty that we are underinvesting in energy.
‘It is not a well thought-through strategy by the Labour Party on energy but I don’t think the Conservatives have a good one either at the moment.’
There hasn’t been a proper debate, he says, about a possible British exit from the European Union, or a Brexit – one of the issues that is upsetting many business leaders who believe it will damage the UK economy. ‘It is the elephant in the room.’
so would a Tory victory, with the prospect of a referendum leading to a possible ‘Brexit’, be worse than a victory by Labour? ‘I haven’t given much thought about the worst outcome from the election yet,’ he admits. ‘It is only a few weeks away and it is very hard fully to understand what are the big points of differentiation.’
He claims neither Labour nor the Tories have a convincing plan to reduce the debt and the deficit.
‘Nobody has a plan actually. Listening to Ed Balls and George Osborne on the couch recently, it was hard to understand what either of them was going to do which was that different.
‘Everyone knows we need welfare reform but no one has a plan. We have some ideas, such as the abolition of higher-rate pension relief,’ he says – a move that would be highly unpopular with many savers who are only moderately well- off.
L&G took an immediate hit from George Osborne’s sweeping overhaul of the pensions system so that people no longer were forced to buy an annuity. As one of the biggest sellers of annuity products, the news came as a blow in the short-term at least.
Wilson says: ‘It is too early to tell. Better flexibility and choice is good, it should be a good thing from society’s point of view, even though they have harmed our business in the short term. If people are doing the right thing, then just because it harms our busi- ness we shouldn’t say it is the wrong thing. Business needs intellectual honesty around that,’ he adds.
The move had a real impact for L&G’s workforce as well, he admits. ‘sadly we had to make a lot of people redundant. We haven’t finished – we are still in consultation, but we will create more jobs elsewhere.’
Businesses in a number of sectors are reluctant to join discussions because they have lost public trust, he suggests. ‘We have lots of industries that are uncomfortable debating in the public arena on the best thing for society because they are so much on the back foot. Energy is one, and banking is another one.
‘When our share price was 40p or 50p,’ – it closed yesterday down 0.2p at 282.9p – ‘I was encouraged by my colleagues to get out and make the case. Even on the day the Chancellor announced about annuities, I went on national television to talk about it. That was the right thing to do. The staff who work here know what I am thinking.’
HE also hits out in the debate about the socalled ‘ mansion tax’, saying it is irrelevant to most people where he comes from. ‘ For most people in the country, the mansion tax is irrelevant.
‘It is seen as relevant only to rich people in London. When I go back north they don’t know anyone who qualifies. The idea that it could apply to someone in a twobedroom flat is beyond their comprehension.’
He also champions the cause of more practical training for students, to allow them to go straight into work.
‘On the whole question of vocational education, we want students we can put into the workplace, as opposed to everyone we get we have to completely retrain. We have to make universities more vocational and business-like.’
He goes further, and suggests some of the big questions – transport, pensions, long-term care and the like – facing the UK economy are too important to be left to politicians.
‘You need an independent body with widespread political support to make these things happen,’ he says.
If his desire to look beyond his narrow interest of boosting L&G’s profitability to encompass the wider benefit of society is feigned, then it is an Oscar-winning act. His focus on slow money has not done his investors any harm either: the total shareholder return since he took the helm in July 2012 has been 147.8pc.
He adds: ‘We are big investors in UK plc so we want to do the right thing. There is obviously a political dimension to that which at times my board colleagues get a bit nervous about.
‘If you have a strategy based on economically and socially useful products and services, it is hard not be political with a small “p”.’