Uniting to back Britain

HERE is something novel after this week’s kerfuffle over Chancellor Rishi sunak’s letter to the Prime Minister, calling for a reopening of travel. Residents of 10 and 11 Downing street have come together to tell Britain’s big battalion investors to stop sitting on savers’ and pensioners’ cash and follow Canadian and australian pension funds – by devoting more money to infrastructure projects and pioneering UK start-ups.

sunak and Boris Johnson could have gone further. They could have told the so-called UK long funds that instead of capitulating at the first sound of gunfire from private equity and other predators – as is the case at Morrisons, aerospace innovators Meggitt et al – they should tell financially driven bidders to get lost.

Brexit has created an opening for UK institutions to broaden their horizons. No longer are asset managers bound by the bureaucratic rule-making on MiFID II which held back the opportunity to diversify.

Under the leadership of Nigel Wilson, Legal & General, Britain’s biggest private investor with £1.28trillion under management, has been blazing a path. It has ramped up returns, generating £900m of new cash in the last year and has broadened its portfolio.

Increasing sums are being assigned to clean energy, residential property, digital infrastructure, science at UK universities and small firms. Under a more relaxed regulatory regime it could do much more.

The Government is finally starting to ripple its muscles when it comes to overseas takeovers by saying it is minded to intervene over Meggitt and it may seek to block the Nvidia takeover of smart-chip maker arm on national security grounds.

It would be tremendous if Britain’s long investors showed the same faith by fighting for and co-investing in British firms, rather than selling them off to the highest bidder.

Bailey’s bounce

A POTENTIAL £5bn loss on government underwritten bounce-back loans designed to prevent long-term scarring to Britain’s business landscape is hard to cast in a positive light.

after all, this would be enough to pay for the surging cost of the ‘triple lock’ on pensions, should average earnings continue to rise. Or it might even be used to pay for the extension of the £20-per-week universal credit uplift to the least well-off families.

Even so, in the context of what was expected of the £47.4bn loan plan, the prospective bad debts of 10pc at most might be regarded as a steal.

as was evident from last week’s UK bank results, concerns of bad loans on anything like the scale of the financial crisis have so far proved unfounded.

Results and dividends were boosted by writing back reserves. Official forecasts for defaults look to have been way off mark.

The Office for Budget Responsibility estimated £15bn and the National audit Office went higher, at £26bn. If the current estimates from the banks are correct, then that should leave some unexpected cash behind the clock as the Chancellor puts together his three-year public spending review.

how did the forecasters get the numbers so wrong? Many of the borrowers were micro, entrepreneur-led firms which had never taken out credit before and saw the bounce-back loans as a backstop.

Only small amounts were drawn down and unlike some bigger firms, more experienced in dealing with the banks, borrowers were concerned about future credit ratings. some loans were also rolled over into the Government’s pay-as-you-go scheme and other plans offering repayment holidays.

The idea of 100pc guarantee was first proposed by Governor of the Bank of England andrew Bailey and seen by critics as an unnecessary giveaway. his judgment has been vindicated.

Maybe Bailey should be given the benefit of the doubt if he declines to cave in to the inflation hawks at today’s interest-rate-setting Monetary Policy Committee.

Real life

IS ANYTHING safe? Private equity group CVC has swooped in with a £2.3bn offer for La Liga, which would hand over to it TV rights, sponsorship and handling the finances of spain’s top football league.

There is a major problem. The two most famous clubs, Real Madrid and Barcelona, are unenthusiastic. They believe much more revenue could be generated by a European super League or something like it.

Prepare for a penalty shootout.