With the oil price rising fast and speculation rampant about possible disruption to trade through the Strait of Hormuz, chief executives were alive to the way politics more than ever impedes on their decision-making.
As Rob Hornby, co-chief executive of Alix Partners, said in his introductory remarks: “CEOs have nowadays adapted to being disrupted all the time.”
Despite the drumbeat of war, delegates overall seemed fairly sanguine. “I sense a dialling up in the optimism compared to last year,” said David Schwimmer, chief executive of the London Stock Exchange Group.
The 2024 summit, which was also addressed by Reeves, came just days before Labour came to power, at a time when chief executives were keen to give a cautious welcome to her recipe of financial stability, a pro-growth agenda and no increases in the main taxes.
Twelve months on, the stability has been delivered, the pro-growth rhetoric stepped up, but the hike in employers’ national insurance payments has been a bad sting in the tail, and a source of real concern with many delegates.
Alex Baldock, chief executive of Currys, claimed it would lead to 350,000 job losses. And the ensuing reduction in payroll tax revenues could lead to Reeves missing her fiscal targets, added Simon French, chief economist at Panmure Liberum.
Certainly C-suite attitudes to the government have turned a little chillier since that summit, where Reeves promised “the most business-friendly government” ever. Had she delivered on that, delegates were asked in an informal straw poll? No one raised their hand.
But on the overall economy, the mood was brighter for some. Dame Amanda Blanc at Aviva said she was seeing “real strength” in the finances of her 17 million customers. “People have cash and money to invest,” she said.
Dame Carolyn McCall, ITV’s chief executive, was more cautious, describing the consumer atmosphere in Britain as febrile: “There’s money to be spent but one of the reasons they are not spending is that they are worried for the future.”
Britain’s supposed aversion to risk dominated the conversation as private equity bosses, including Blackstone’s Lionel Assant and Tara Davies of KKR, made a passionate case for pension funds to allocate more to their asset classes.
There was £500 billion of cash savings ready to be “unleashed” into private business if only investors and regulators could dial up their appetite for risk, said Assant.
A T-shirt wearing Saul Klein, a venture capital boss and part-time adviser to Sir Keir Starmer on science and technology, lambasted the risk-phobic City suits. Only two UK organisations — the UK government through the British Business Bank and M&G — were investing at scale in UK start-ups, he said.
“Everyone else is putting out press releases,” he jeered. Moreover, British savers were being saddled with inferior returns because of the reluctance to dial up the risk.
Some delegates in private conversations were not so sure about that. Private equity is having a lean time and looking for future sources of funding and sees pension funds as a wonderful fresh source of fees.
And while encouraging pension funds to invest in the UK was seen as positive, forcing them to was unpopular. In another straw poll, perhaps ten hands were raised in favour of mandation.
Schwimmer was adamant there should be some kind of quid pro quo for the £50 billion of annual tax relief given to UK pension funds. “If they want the tax benefits from the UK there should be some kind of minimum allocation to investing in the UK market.”
Reeves later tried to soothe concerns about mandation. It was “frustrating” that UK pension funds allocated less money to home-country assets than schemes in other countries, she said. “I don’t think we need mandation,” she said, and the threat of it was only “a backstop in the [Pension Investments] Bill.” Delegates privately expressed concern that even that was a tool that could be used at a later date.
Artificial intelligence was the other big talking point at the summit. Everyone seemed to have a story of how AI could do some things better, or at least faster, than humans. Dame Alison Brittain, a senior independent director at Experian, described how one difficult process had been reduced from 15 minutes when done by a human to one minute 36 seconds when handled by an AI agent, with the same error rate. “And we know AI will learn and get better on the error rate,” she added.
McCall said AI was used for subtitling and dubbing programmes at ITV, while the easyJet chief Kenton Jarvis said AI was proving “a fantastic gift” for creating quick, localised marketing in the right language as well as for optimising the product mix for in-flight sales.
* Give pension funds a reason to invest in the UK — don’t threaten them
Where AI is going and how fast was harder to know for sure, but the imperative to experiment was strong. “Everyone is terrified of not doing enough on AI,” said McCall. Delegates were concerned not enough is being done to educate future workers on AI. “Teachers are way behind on the technology,” said Brittain.
AI was seen by many as a game-changer that could help lift Britain’s becalmed productivity growth rate. Financial gifts from such a cash-strapped chancellor were seen as highly unlikely. No one even bothered to ask for the end of stamp duty on shares, a widely hated impost seen as seriously damaging the appeal of the UK market.
“The answer can’t always be yes,” said Reeves in answer to a different question on why she hadn’t provided rescue money for the Wigan-based Electric Glass Fiber, Britain’s biggest maker of fibreglass materials for electric cars and wind turbines, which said it would have to close this week.
It may be a response that business has to get used to as the chancellor strains to keep the public finances in check.
