tag:theconversation.com,2011:/fr/topics/uk-business-26179/articlesUK business – The Conversation2023-12-06T15:53:38Ztag:theconversation.com,2011:article/2180622023-12-06T15:53:38Z2023-12-06T15:53:38ZRural communities are being left behind because of poor digital infrastructure, research shows<p>In an era where businesses and households depend on the internet for everything from marketing to banking and shopping, the lack of adequate digital access can be a significant hurdle. And our recent research shows that many <a href="https://research.aber.ac.uk/en/publications/the-socio-economic-impact-of-the-covid-19-pandemic-on-ceredigion-">homes</a> and <a href="https://research.aber.ac.uk/en/publications/the-economic-impact-of-the-covid-19-pandemic-on-ceredigion-busine">businesses</a> in the UK are being left stranded in the digital age.</p>
<p>Our two studies focused on a rural county in Wales, Ceredigion, where the lack of reliable digital infrastructure worsened the impacts of the pandemic on families and businesses. Poor digital accessibility and connectivity exacerbated the stress levels of families who were already having to juggle home schooling and working from home. </p>
<p>Similarly, businesses had to struggle with issues around internet provision, availability of effective digital infrastructure and digital proficiency while working and running businesses from home. </p>
<p>Our research involved two online surveys. One focused on households and the other on businesses and the self-employed between April and June 2021. The survey questions were designed to address the challenges and opportunities brought about by the pandemic. </p>
<p>Some important themes emerged in the responses we received to both surveys. These were insufficient digital accessibility and connectivity, lack of digital skills and training opportunities and the cost of broadband and mobile access.</p>
<h2>Household experiences</h2>
<p>Our research showed that 12% of homes did not have enough digital equipment for their needs during the pandemic and 76% of these included children who were being home schooled. Schools and some workplaces provided equipment in some instances, but 18% of households had to borrow equipment. </p>
<p>Despite that ability to borrow, many homes found themselves juggling equipment between homeworking adults and children learning online. Many pupils relied on small mobile devices to access lessons, while others lacked access to equipment like printers.</p>
<p>These problems were compounded in rural and remote areas, where slow broadband speeds and a lack of reliable mobile signal were cited as the biggest issues. Other issues included the cost of broadband and mobile access, the lack of digital skills or training opportunities to improve digital skills, poor customer service from broadband providers and issues with connectivity.</p>
<h2>Business and self-employed experiences</h2>
<p>The pandemic brought similar challenges to businesses. The closure of non-essential firms during the pandemic led to a <a href="https://www.oecd.org/coronavirus/policy-responses/e-commerce-in-the-time-of-covid-19-3a2b78e8/">surge</a> in e-commerce. Companies that could embrace online sales were able to continue operating despite lockdowns and restrictions. </p>
<p>But businesses that were slow to adopt e-commerce or lacked the necessary infrastructure struggled to adapt. In fact, our research found that 47% of businesses faced difficulties with digital access and connectivity during the pandemic. Some of the other issues faced by businesses included:</p>
<p>• a lack of reliable broadband or mobile (37%)</p>
<p>• slow broadband speed (29%)</p>
<p>• poor mobile signal (26%)</p>
<p>• lack of digital skills or access to training schemes (16%)</p>
<p>• the cost of access (13%)</p>
<p>People working from home in rural locations also had problems due to a lack of digital infrastructure, poor connectivity and a lack of digital skills. </p>
<h2>Bridging the gap</h2>
<p>In the future, an increased reliance on online work, education and public services, such as online health and welfare support, will further disadvantage those without adequate internet access. The digital divide is widening between those with higher incomes and those with lower incomes. </p>
<p>For example, households with higher incomes were <a href="https://www.scirp.org/reference/referencespapers?referenceid=3051117">more likely</a> to have had access to technology for home schooling and remote working during the pandemic, unlike those with lower incomes.</p>
<p>The gap in access to digital technology is often determined by location too. Remote and sparsely populated areas often lack adequate broadband and mobile signal coverage. Bridging this digital divide is crucial for economic growth, social inclusion and access to essential services. </p>
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Read more:
<a href="https://theconversation.com/how-teachers-supported-children-and-parents-through-covid-19-school-closures-181380">How teachers supported children and parents through COVID-19 school closures</a>
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<p>To address the digital divide, the UK and devolved governments need to invest in digital infrastructure in rural areas to ensure that everywhere has at least a minimum quality coverage. Local authorities could introduce schemes that enable people to gain access to cost-effective computer devices and internet access.</p>
<p>Expanding digital literacy and empowering businesses in rural areas is also crucial. Enhancing digital skills training would better prepare future generations for the digital world. </p>
<p>Additionally, businesses in rural areas require tailored support, such as funding for digital infrastructure upgrades, training opportunities and guidance on consumer privacy and protection, to enable their digital growth and sustainability.</p><img src="https://counter.theconversation.com/content/218062/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Aloysius Igboekwu currently volunteers for a Childcare charity as a Trustee. </span></em></p><p class="fine-print"><em><span>Maria Plotnikova and Sarah Lindop do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>New research reveals the digital divide that was exposed by the COVID pandemic.Aloysius Igboekwu, Senior Lecturer in Finance, Aberystwyth UniversityMaria Plotnikova, Lecturer in Economics, Aberystwyth UniversitySarah Lindop, Senior Lecturer in Finance, Aberystwyth UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2132842023-09-12T13:09:18Z2023-09-12T13:09:18ZWilko: what insolvency really means for the budget retailer and why its competitors are surviving (for now)<figure><img src="https://images.theconversation.com/files/547596/original/file-20230911-22-surxcf.jpg?ixlib=rb-1.1.0&rect=233%2C450%2C4905%2C2961&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/bristol-uk-august-13-2023-wilko-2348847661">Zeynep Demir Aslim/Shutterstock</a></span></figcaption></figure><p>All 400 of Wilko’s shops are now <a href="https://news.sky.com/story/all-wilko-stores-to-close-with-the-loss-of-12-500-jobs-union-12959069#:%7E:text=All%20400%20branches%20of%20collapsed,administrators%20PwC%20on%20Monday%20morning.">expected to close</a> over the next month, leaving 12,500 people without jobs across the UK. The budget retailer’s administrator <a href="https://www.pwc.co.uk/press-room/press-releases/wilko-update-11-sept-23.html">PwC announced the news</a> after it struggled to secure <a href="https://news.sky.com/story/more-wilko-job-losses-loom-as-putman-rescue-deal-collapses-12958920">a rescue deal</a> for Wilko to continue operating.</p>
<p>After swooping in to rescue collapsed music chain <a href="https://www.telegraph.co.uk/business/2019/02/05/hmv-rescue-deal-save-100-stores/">HMV in 2019</a>, Canadian businessman Doug Putman had hoped to do the same for Wilko. But his plan to rescue the company as <a href="https://www.thecorporategovernanceinstitute.com/insights/lexicon/what-is-a-going-concern/">a going concern</a> – a business that will continue to operate and meet its financial obligations – was “hampered by the costs and difficulties thrown up by the need to overhaul Wilko’s supply chains”, <a href="https://www.bbc.co.uk/news/business-66743050">according to news reports</a>. </p>
<p>Putman had already scaled back his rescue plan from saving around 300 shops to around 100, but he has now announced he won’t be able to continue with the deal at all.</p>
<p>In the space of a few weeks, it may seem that Wilko’s demise has been rapid, but the financial problems that lead to its insolvency and subsequent entry into <a href="https://www.gov.uk/put-your-company-into-administration">administration</a> have happened over <a href="https://www.thisismoney.co.uk/money/markets/article-12473183/Auditor-EY-fire-green-light-Wilko.html">a much longer time period</a>. </p>
<p>What we are witnessing now is the endgame and the aftermath of a company that has failed to attract an investor for its entire business. </p>
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Read more:
<a href="https://theconversation.com/wilko-is-the-latest-shop-to-be-edged-out-by-competition-but-it-doesnt-have-to-mean-the-end-for-the-budget-retailer-211161">Wilko is the latest shop to be edged out by competition but it doesn't have to mean the end for the budget retailer</a>
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<p>Wilko’s difficulties securing a rescue deal happened for a number of reasons. Initially, any investor would have been expected to inject <a href="https://www.ft.com/content/9f0308fd-027e-4005-8e32-a7042fa33f4b">£75 million into the company</a> to clear existing debts. Now the company is in administration, this is no longer the case and interested parties can cherry-pick assets.</p>
<p>The company also lacks any real unique selling point that would make it attractive to other competitors. In other words it has been <a href="https://www.retail-insight-network.com/newsletters/wilko-enters-administration-outflanked-by-competitors/?utm_source=media-website&utm_medium=Menu&utm_content=In_our_previous_edition&utm_campaigntype3_retail-market">outplayed by the competition</a> in its own market and now finds itself in the same position as failed retailer <a href="https://www.theguardian.com/business/2008/nov/26/woolworths-administration-high-street-retailers">Woolworths did back in 2008</a>.</p>
<h2>Company rescue versus business rescue</h2>
<p>The purpose of administration can be found in a section of the <a href="https://www.legislation.gov.uk/ukpga/1986/45/schedule/B1">Insolvency Act 1986</a>. The primary aim is to rescue a company as a going concern. In the early days of Wilko’s troubles, Putman had planned to acquire more than <a href="https://news.sky.com/story/hmv-owner-putman-edges-closer-to-rescue-deal-for-bulk-of-wilko-12951512">300 of its 400 stores</a>, which would have saved around 8,000-9,000 of Wilko’s total 12,500 workforce. This was later reduced to 100 stores, and now, nothing. </p>
<p>The most likely alternative suitors – other budget brands such as Poundland, Primark, Home Bargains and B&M – may now negotiate for smaller groups of stores. B&M has already come forward with <a href="https://www.reuters.com/business/retail-consumer/uks-discount-retailer-bm-buy-51-stores-collapsed-wilko-2023-09-05/">a £13 million offer for up to 51 stores</a>. In other words, a carve up of Wilko’s 400 stores is probably now the most viable option.</p>
<p>This is not a company rescue, but rather a business rescue that aims to achieve a better result for the company’s creditors than if the company was wound up (<a href="https://www.gov.uk/liquidate-your-company">liquidated</a>). In cases such as this, only parts of the business will be salvaged.</p>
<h2>What could business rescue look like for Wilko?</h2>
<p>Since a single buyer currently looks unlikely, the carve-up is likely to be extensive, with Wilko as we know it probably ceasing to exist. The impact on the high street will be significant, leaving a <a href="https://www.bloomberg.com/news/articles/2023-08-12/wilko-s-fall-leaves-a-gaping-hole-in-british-town-centers?leadSource=uverify%20wall">huge hole in British town centres</a>, where Wilko currently occupies 11 million square feet of space.</p>
<p>Indeed, aside from B&M, the Range has expressed an interest but only in the purchase of <a href="https://www.retailgazette.co.uk/blog/2023/08/wilko-who-running-to-buy/">Wilko’s brand and online operations</a>. This is similar to when <a href="https://www.bbc.co.uk/news/business-55793411">ASOS bought the Debenhams</a> brand and website in 2021, but not its brick and mortar stores.</p>
<p>The bargain retail sector is highly competitive and has a history of such carve-ups. In 2008, Woolworths failed and nearly a quarter of its 800 stores were acquired by the very names <a href="https://news.sky.com/story/the-wilko-name-may-live-on-but-job-losses-are-inevitable-12944535">now linked to Wilko</a>: <a href="https://www.bristolpost.co.uk/news/uk-world-news/poundland-talks-save-100-wilko-8743516">Poundland</a> and B&M. There is also a strong possibility that some of Wilko’s stores may not be bought – 300 former Woolworths stores remained empty after it collapsed.</p>
<p>Woolworths was subject to a similar business rescue strategy as Wilko is now experiencing. Back in 2008, Poundland, the 99p Stores Chain, B&M, and Poundstretcher <a href="https://www.retail-week.com/woolies-watch-what-happened-to-your-local-woolworths/5005683.article">shared out</a> many of its shops. For the companies in this group that remain in 2023 (the 99p Stores was bought by <a href="https://www.theguardian.com/business/2015/feb/06/poundand-buys-rival-99p-stores">Poundland in 2015</a>), various <a href="https://www.thegrocer.co.uk/poundland/poundland-sales-and-profits-tumble-after-lockdowns-hit-footfall/659565.article#:%7E:text=Poundland's%20sales%20and%20profits,m%20to%20%C2%A38.6m.">financial problems</a> have <a href="https://www.thegrocer.co.uk/people/poundstretcher-has-reduced-workforce-by-1000-staff/679210.article#:%7E:text=The%20majority%20of%20the%20stores,88m%20to%20%C2%A311.7m.">been a feature</a> of this <a href="https://www.theguardian.com/business/2022/may/31/bm-warns-of-profit-fall-as-inflation-squeezes-customers-and-retail-sector">highly volatile market</a>.</p>
<h2>Is failure inevitable?</h2>
<p>Wilko is in administration simply because its competitors do what it does, but better. They offer out of town premises, increasing convenience to shoppers with larger warehouses for a greater range of products. They also buy in bulk, which means cheaper prices. Wilko, which has suffered from supply chain issues recently, has simply <a href="https://www.ft.com/content/9f0308fd-027e-4005-8e32-a7042fa33f4b">failed to keep up</a>.</p>
<p>The process by which companies are replaced by new more efficient companies over time is called <a href="https://www.e-elgar.com/shop/gbp/the-interpretation-and-value-of-corporate-rescue-9781839101397.html">creative destruction</a>. It may upset nostalgia-lovers, but it plays an important role in ensuring financially troubled companies do not continue to operate indefinitely while their debts increase. Companies and their <a href="https://www.thecorporategovernanceinstitute.com/insights/guides/when-is-a-company-director-liable-for-company-debts/">directors can be held accountable</a> to creditors, which can include taking action to limit financial losses. In that respect, insolvency acts as a way to prevent losses spiralling out of control.</p>
<p>In time, almost every company will be subject to financial distress and a large portion of those companies <a href="https://www.e-elgar.com/shop/gbp/the-interpretation-and-value-of-corporate-rescue-9781839101397.html#:%7E:text=This%20incisive%20book%20critically%20explores,new%20significance%20to%20rescue%20theory.">will inevitably fail</a>. At the moment, however, Wilko’s rivals are surviving, and their survival rates will increase for the time being, as Wilko’s customers shift their spending power over to these other budget brands.</p><img src="https://counter.theconversation.com/content/213284/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Wood does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The budget retail chain was hoping for a white knight but now it looks like the business will be split among companies including its main high street rivals.John Wood, Lecturer in Law, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2127622023-09-05T12:14:19Z2023-09-05T12:14:19ZLondon is a major reason for the UK’s inequality problem. Unfortunately, City leaders don’t want to talk about it<figure><img src="https://images.theconversation.com/files/546046/original/file-20230903-23-jnvlva.jpg?ixlib=rb-1.1.0&rect=0%2C108%2C4323%2C2852&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">City leaders often appear reluctant to discuss London't role in growing levels of regional inequality.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-april-22-2015-businessman-273414197">I.R.Stone/Shutterstock</a></span></figcaption></figure><p>In recent years, there has been growing evidence that the UK economy is in poor shape. While the latest economic figures suggest it <a href="https://www.bbc.co.uk/news/business-66680188">performed better</a> as the COVID pandemic receded than was <a href="https://www.ons.gov.uk/economy/grossdomesticproductgdp/bulletins/gdpfirstquarterlyestimateuk/apriltojune2020">previously reported</a>, the performance of sectors such as manufacturing, construction and agriculture has been <a href="https://www.ft.com/content/19746fd9-d5d0-4e02-920c-745611705ecf">revised downwards</a>, leading some experts to warn of a greater risk of a recession to come.</p>
<p>Alongside these economic challenges, the UK faces many societal issues – including rising levels of inequality, with the country’s <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/birthsdeathsandmarriages/families/methodologies/theginicoefficient#:%7E:text=The%20Gini%20coefficient%20is%20a,share%20of%20total%20household%20income.">Gini coefficient</a> projected to reach a <a href="https://www.resolutionfoundation.org/publications/the-living-standards-outlook-2023/#:%7E:text=Although%20income%20inequality%20across%20the,per%20cent%20in%202027%2D28.">record high of 40.8%</a> in 2027-28. In 2022, the richest fifth of the UK population had an income <a href="https://equalitytrust.org.uk/scale-economic-inequality-uk">more than 12 times</a> that of the poorest fifth.</p>
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<p><em><strong>This article is run in partnership with <a href="https://howthelightgetsin.org/festivals/london?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">HowTheLightGetsIn</a></strong>, the world’s largest philosophy and music festival, which returns to Kenwood House in London on September 23-24. On Saturday 23, Louise Ashley will join Julia Davies, Gerry Mitchell and The Conversation’s Mike Herd to discuss how to restructure society for <a href="https://howthelightgetsin.org/events/the-common-good-16017">the common good</a>. See the festival’s <a href="https://howthelightgetsin.org/festivals/london/the-big-ideas/speakers">full line-up of speakers</a> and <a href="https://howthelightgetsin.org/festivals/london/festival-passes?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">get 20% off tickets here</a> with code CONVO23.</em></p>
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<p>Another factor that marks the UK out is the extent to which its economy is geographically unbalanced. The Financial Times’s chief data reporter, John Burn-Murdoch, recently highlighted how the UK compares on per-capita economic performance <a href="https://www.ft.com/content/e5c741a7-befa-4d49-a819-f1b0510a9802">once London is removed</a>. The answer? Worse than Mississippi, the US’s worst-performing state, because “removing London’s output and headcount would shave 14% off British living standards”.</p>
<p>Some commentators suggest these figures underline the importance of London – and in particular, its financial district – as the UK’s most significant economic asset. According to the City of London Corporation, the financial and professional services sector as a whole <a href="https://www.cityoflondon.gov.uk/supporting-businesses/economic-research/research-publications/city-statistics-briefing#:%7E:text=Financial%20and%20professional%20services%20produced,FDI%20for%20the%20UK%20economy.&text=The%20City%20drives%20the%20economy,85bn%20in%20economic%20output%20annually.">contributed</a> nearly £100bn in taxes in 2020, and £278bn in economic output in 2022. Many of these firms are located in the City, which the Corporation states “drives the UK economy, generating over £85bn in economic output annually”.</p>
<p>An alternative perspective is that these contributions should be balanced against what the City takes out of the wider UK economy. One argument is that the City has been at the forefront of the <a href="https://blogs.lse.ac.uk/europpblog/2022/01/10/inside-britains-financial-revolution/">financialisation</a> of the UK economy, whereby most investment is channelled into assets such as <a href="https://www.theguardian.com/commentisfree/2023/aug/30/wealth-tax-labour-economics-rachel-reeves">property, infrastructure and financial assets</a>, rather than supporting more <a href="https://www.bankofengland.co.uk/-/media/boe/files/paper/2016/understanding-and-measuring-finance-for-productive-investment.pdf">productive investment</a> in new businesses and small firms.</p>
<p>Certainly, the City of London is heavily implicated in the UK’s widening inequalities of income and wealth, both through its daily business activities and its remuneration practices. In 2022, the Institute for Fiscal Studies <a href="https://www.theguardian.com/business/2022/may/04/city-london-bonus-boom-risk-driving-up-inequality-institute-fiscal-studies">warned</a> that the biggest boom in City bonuses since the 2008 financial crisis would further increase this inequality gap.</p>
<h2>The City’s diversity smokescreen</h2>
<p>This is a complex picture, but few disagree that developing a more equitable UK economy and society requires significant structural change. Politically, this has been recognised from most sides amid often <a href="https://www.politics.co.uk/parliament/tensions-boil-over-during-levelling-up-debate/">heated</a> debates about the new <a href="https://www.politicshome.com/news/article/levelling-up-bill-house-of-lords-kings-speech-michael-gove">levelling-up bill</a>.</p>
<p>However, to the extent that the City of London has responded to its role in the UK inequalities, the dominant focus has been on who its elite firms recruit and promote, rather than its wider impact.</p>
<p>My book, <a href="https://bristoluniversitypress.co.uk/highly-discriminating">Highly Discriminating</a>, and the related <a href="https://theconversation.com/class-and-the-city-of-london-my-decade-of-research-shows-why-elitism-is-endemic-and-top-firms-dont-really-care-199474">Conversation long read</a> offered evidence that while the City’s recent focus on diversity and inclusion can be life-changing for a few individuals, to date it has still largely maintained the traditional white, male and privately educated status quo at the top.</p>
<p>Most worryingly, I concluded that such programmes can be used as a smokescreen, giving elite firms a certain legitimacy that distracts from demands for a more open debate about the City’s wider responsibility in driving up geographical and related inequalities.</p>
<p>On numerous occasions (both privately and in public), I have been criticised by City leaders for raising this, on the grounds that it is not only impolite but demoralising for people engaged in diversity and inclusion work, and risks setting that agenda back. I believe such defensiveness highlights how financial and professional leaders protect their privileged position – by policing the boundaries of what is “acceptable” to say about the inequalities to which their firms contribute.</p>
<p>Many City bosses operate <a href="https://theconversation.com/class-and-the-city-of-london-my-decade-of-research-shows-why-elitism-is-endemic-and-top-firms-dont-really-care-199474">within an echo chamber</a> that suggests to them there is more consensus around the City’s positive contribution to UK society than is actually the case. Their power and influence insulates them from criticism and challenge. When it does come, their defensive reaction is stifling a much-needed, nuanced public debate around how to tackle the inequalities that blight so many people’s lives.</p>
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Read more:
<a href="https://theconversation.com/class-and-the-city-of-london-my-decade-of-research-shows-why-elitism-is-endemic-and-top-firms-dont-really-care-199474">Class and the City of London: my decade of research shows why elitism is endemic and top firms don't really care</a>
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<h2>Changing the national conversation</h2>
<p>Over the past decade, <a href="https://www.researchgate.net/publication/293014505_Understanding_social_exclusion_in_elite_professional_service_firms_field_level_dynamics_and_the_%27professional_project">I have conducted</a> hundreds of interviews with City of London workers at all levels, many of whom are strongly committed to a more equitable economic and social system. I believe they are well placed to help change the national conversation, by asking more of their leaders on this front.</p>
<p>Within many corporate organisations, the issue of inequality is positioned as part of corporate sustainability agendas, or the currently more fashionable “environmental, social and governance”. Yet like diversity and inclusion, as this agenda is implemented within a model that prioritises profit maximisation over economic justice, it may have a similarly cosmetic effect. More meaningful improvements would require business leaders to engage more closely with how we can build a <a href="https://blogs.lse.ac.uk/politicsandpolicy/re-imagining-politics-to-build-a-fairer-society-qa-with-daniel-chandler/">more egalitarian economic system</a> that allows for shared prosperity.</p>
<p>The momentum to help drive these and many other changes requires a majority of the population on board. But this is more likely if business leaders are brave enough to acknowledge the UK’s key structural problems while opening up their related operations to wider scrutiny and debate.</p>
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Read more:
<a href="https://theconversation.com/poverty-in-britain-is-firmly-linked-to-the-countrys-mountain-of-private-wealth-labour-must-address-this-growing-inequality-212741">Poverty in Britain is firmly linked to the country’s mountain of private wealth – Labour must address this growing inequality</a>
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<p>In June, Julia Davies, a founding member of <a href="https://patrioticmillionaires.uk/about-us">Patriotic Millionaires UK</a>, <a href="https://www.theguardian.com/news/2023/jun/30/uk-super-rich-beware-pitchforks-torches-unless-they-do-more">warned delegates</a> at an international investment conference in London of a “real risk of actual insurrection” and “civil disruption” if the inequality gap between rich and poor is allowed to widen. There has long been <a href="https://equalitytrust.org.uk/about-inequality/spirit-level">clear evidence</a> that inequalities are ultimately bad for everyone in a society.</p>
<p>Yet consciously or otherwise, many City leaders still impose tight limits on what is considered reasonable to say about the inequalities their organisations help to create. Perhaps we should take note of the University of Bristol’s Kirsty Sedgeman, who has suggested that in pursuit of social justice, more of us need to become “<a href="https://www.google.com/url?q=https://www.faber.co.uk/product/9780571366835-on-being-unreasonable/&sa=D&source=docs&ust=1693733842307721&usg=AOvVaw1H8Y5NoPVDRtAbaPgheLxP">reasonably unreasonable</a>”, to encourage our business and political leaders to think and act differently, and widen the conversation about the UK’s growing inequality gap.</p>
<p>London and its financial and professional services powerhouse are at the heart of the UK’s failing attempts to level up. We need its leaders to play a central role in our national debate about how to address this problem. This is no time for denial and distraction.</p>
<p><em><a href="https://howthelightgetsin.org/festivals/london?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">HowTheLightGetsIn</a>’s theme for London 2023 is <a href="https://howthelightgetsin.org/festivals/london/the-big-ideas">Dangers, Desire and Destiny</a>. The two-day festival on September 23-24 covers everything from politics, science, philosophy and the arts and attracts a host of speakers including Nobel Laureates, Pulitzer prize-winners, political activists and world leading thinkers.</em></p>
<p><em>Alongside the Conversation’s curated event <a href="https://howthelightgetsin.org/events/the-common-good-16017">The Common Good</a>, expect to see Alastair Campbell, Rory Stewart, Ruby Wax, Michio Kaku, David Baddiel, Carol Gilligan, Martin Wolf and more lock horns over a packed weekend of debates, talks and performances. <a href="https://howthelightgetsin.org/festivals/london/programme?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">Explore the full programme here</a> and don’t miss out on <a href="https://howthelightgetsin.org/festivals/london/festival-passes?utm_source=MP+L23+Conversation&utm_medium=Article+feature&utm_campaign=HTLGI+London+2023&utm_id=The+Conversation">20% off tickets using code CONVO23</a>.</em></p><img src="https://counter.theconversation.com/content/212762/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Louise Ashley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Business bosses appear reluctant to take part in open debate about their firms’ contribution to growing regional inequalities.Louise Ashley, Senior Lecturer in Sociology of Work, Queen Mary University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2070842023-06-06T17:17:42Z2023-06-06T17:17:42ZCBI: organisations that want to end workplace harassment must start by addressing power imbalances<p>Members of the Confederation of British Industry (CBI) – which calls itself “<a href="https://www.telegraph.co.uk/business/2023/05/31/cbi-toxic-culture-confidence-vote/">the voice of business</a>” in Britain – have <a href="https://news.sky.com/story/cbi-finalises-plans-for-crucial-vote-on-business-groups-future-12888990">voted on a revamp of the organisation</a> following allegations of misconduct, sexual harassment and rape in recent months. The City of London police is also <a href="https://www.standard.co.uk/news/uk/city-of-london-police-cbi-probe-women-sex-misconduct-tony-danker-b1073469.html">investigating the reported misconduct</a>.</p>
<p>The business lobby group that represents 190,000 companies, which fund its operations has seen <a href="https://www.bbc.co.uk/news/business-65345595">an outflow of big name members</a> including John Lewis, BMW, Virgin Media, O2, Aviva and Mastercard following these allegations. Both <a href="https://news.sky.com/story/cbi-scandal-chancellor-declares-there-is-no-point-engaging-with-lobby-group-12865084">the government</a> and <a href="https://www.theguardian.com/business/2023/apr/23/labour-cuts-ties-with-cbi-and-says-lobby-group-needs-root-and-branch-reform">the Labour party</a> have also severed ties with the organisation. This leaves its future representing business interests to politicians very much in doubt. </p>
<p>A <a href="https://www.bbc.co.uk/news/business-65804767">rival group from the British Chambers of Commerce</a> has already stepped forward to “design and drive the future of the British economy”. It has attracted members including BP and Heathrow Airport.</p>
<p>In a bid to keep its place, the CBI has put forward <a href="https://www.cbi.org.uk/media/lkto4nzv/a-renewed-cbi-prospectus.pdf">a plan to redeem itself</a> in the eyes of its members and the public. This includes a review of its company culture and a refresh of its board. The new plan received <a href="https://www.cbi.org.uk/media-centre/articles/cbi-secures-strong-mandate-from-membership-with-93-voting-in-favour/">97% of 371 votes cast</a> at a member meeting on Tuesday June 6. The CBI did not disclose how many organisations were eligible to vote and while it represents 190,000 firms, many of those are via trade associations.</p>
<p>But it comes after accusations of <a href="https://www.cbi.org.uk/media/m0pcest1/annex-to-open-letterapril23.pdf">brushing aside concerns and complaints</a>, and a failure to remove alleged offenders – never mind a failure to recruit staff with <a href="https://www.bbc.co.uk/news/business-65375311">appropriate attitudes and values</a> in the first place. </p>
<p>It’s extremely difficult to achieve a culture reboot without altering an organisation’s core beliefs and assumptions, and redesigning its governance power structures. Changing these difficult-to-measure elements takes more than the right words. It requires a fundamental overhaul of an organisation’s power structures.</p>
<h2>Sexual harassment at work</h2>
<p>Harassment happens when attitudes and belief systems uphold power differentials among people based on their gender or other attributes. These systems also help to deny, rationalise and <a href="https://theconversation.com/step-one-of-breaking-the-harassment-cycle-take-women-seriously-86636">ultimately prevent abuse from surfacing</a>. Institutions that reflect certain attitudes and beliefs about gender stereotypes enable these systems, while powerful organisational actors maintain them. </p>
<p>In the case of the CBI, for example, rather than sack alleged offenders, its leadership tried to find a resolution before the harassment complaints became public. Other major institutions such as the <a href="https://www.ft.com/content/5e5b8080-6352-4614-a1e8-66608270090d">World Health Organization</a>, <a href="https://www.bbc.co.uk/news/health-56670162">Oxfam</a> and the <a href="https://committees.parliament.uk/work/3401/sexual-exploitation-and-abuse-in-the-aid-sector-inquiry/news/101535/organisational-culture-and-sexual-harassment-in-the-workplace-examined/">aid sector more generally</a> have reacted in similar ways.</p>
<p>The #MeToo movement has shown that sexual harassment is systemic in many organisations. It is often deeply ingrained in company culture and characterised by <a href="https://hbr.org/2019/10/ending-harassment-culture">pay and power inequalities</a>. Research by the UK government’s Equalities Commission in 2020 found <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1002873/2021-07-12_Sexual_Harassment_Report_FINAL.pdf">72% of the UK population</a> has experienced at least one form of sexual harassment in their lifetime – with 43% experiencing this in the last 12 months.</p>
<p>Money and power are interconnected, so disparities such as the gender pay gap make sexual harassment more likely. But harassment also lowers the earning capacity of those who experience it by worsening their mental health, increasing absenteeism, and causing silent withdrawal. Employee harassment can cost companies an average of US$22,500 (£18,136) in productivity per harassed person, <a href="https://www.icrw.org/wp-content/uploads/2018/08/ICRW_SBHDonorBrief_v4_WebReady.pdf">according to some measures</a>. The actual costs to society are likely to be much higher.</p>
<h2>Organisational culture: reflecting values</h2>
<p>A recent emphasis on organisational culture reflects a shift throughout much of the western world of work from the management of skills to the management of values. Employees’ commitment to their organisations can enhance firms’ performance by fostering innovation and creativity. But the focus is often on visible rituals, marketing slogans and corporate image – the superficial elements that academic Edgar Schein called “<a href="https://sloanreview.mit.edu/article/coming-to-a-new-awareness-of-organizational-culture/?use_credit=fecf2c550171d3195c879d115440ae45">visible artifacts</a>”.</p>
<p>Values are much harder to address. They are often unconscious assumptions about the world. And so culture change programmes run the risk of leading to superficial compliance, rather than a real commitment to the profound shifts that organisations such as CBI really need. </p>
<p>Organisational culture is not a physical, measurable thing that can be visibly altered to enhance performance or win support. Instead, its a collective mental state that’s in flux and so <a href="https://www.jstor.org/stable/2392246">must be constantly renegotiated by the organisation</a>. In the 1980s, US academics Caren Siehl and Joanne Martin called organisational culture “the glue that holds members of an organisation together by <a href="https://www.gsb.stanford.edu/faculty-research/publications/role-symbolic-management-how-can-managers-effectively-transmit">encouraging them to share patterns of meaning</a>” or ways of understanding values, beliefs and how to behave.</p>
<p>Some of the (female) leaders of former CBI member companies understood this when speaking out about the need for CBI management to shift towards promoting lived values rather than “<a href="https://www.theguardian.com/business/2023/jun/03/women-in-business-on-cbi-future-culture-governance">corporate bullshit</a>”. Those holding the power in an organisation need to be willing and truly committed to examining their own assumptions and values to achieve this. So how can they do that?</p>
<h2>Invisible power structures</h2>
<p>Research on the effectiveness of boards shows corporate governance failures (even by companies with otherwise excellent governance records) happen when there is a <a href="https://www.jstor.org/stable/1837292">separation between ownership and control</a> of an organisation. </p>
<p>Independent, non-executive directors can provide much-needed checks and balances to ensure that executive members represent the organisation’s interests, not just their own. However, their impact will be minimal if they merely “rubber stamp” executive decisions. </p>
<p>A lack of diversity in terms of age, gender, expertise, experience or ethnicity on a board <a href="https://openlibrary.org/books/OL3513757M/Groupthink">can lead to groupthink</a> in such situations. This promotes unanimity and cohesion over accountability. Recruitment of certain types of men, <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/j.1468-0432.2012.00595.x">while excluding women</a>, and the development informal networks among board members can also reinforce poor decision making. </p>
<p>Finally, we often assume that board and leadership actions emerge from rational considerations, <a href="https://doi.org/10.1080/02699930903132496">ignoring the role of unconscious bias</a> and power dynamics that can better <a href="https://onlinelibrary.wiley.com/doi/10.1111/j.1467-8551.2010.00716.x">explain sexist and misogynistic culture</a>. </p>
<p>The CBI is governed by a president and an executive committee chaired by a director general, who also sits on the non-executive board. The president, due to leave in January 2024, has said he has <a href="https://www.ft.com/content/aecd2fb1-86f7-4d25-ac15-92c42dfa4096">lost the board’s confidence</a>. Ex-director general, Tony Danker, was sacked in the wake of the rape accusations <a href="https://www.bbc.co.uk/news/business-65313822">for an unrelated reason</a>. In a BBC interview he apologised for making some staff feel “very uncomfortable”, but said his name had been wrongly associated with claims that had allegedly occurred before he joined the CBI.</p>
<p>The <a href="https://www.cbi.org.uk/media-centre/articles/rain-newton-smith-named-as-cbi-director-general/">new director general, Rain Newton-Smith</a> has returned to the CBI following a stint at Barclays. Previously the lobby group’s chief economist, she has also worked for the Bank of England. Newton-Smith must now prove to members – and the wider public – that the CBI can overhaul its culture in order to survive. Ensuring these informal networks do not affect the organisation’s decision-making processes and accountability will be key to this.</p>
<p>The leadership of the CBI – and other organisations like it must consider neglected or silent points of view or risk failing to rebuild appropriate governance structures and a more equitable culture.</p><img src="https://counter.theconversation.com/content/207084/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Marianna Fotaki does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>To win back the trust of its members, policymakers and the public, the CBI must change its culture and governance. But this is a very difficult undertaking.Marianna Fotaki, Professor of Business Ethics, Warwick Business School, University of WarwickLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2054832023-05-15T11:47:05Z2023-05-15T11:47:05ZThe UK needs a new industrial strategy or it will lose the global green subsidy race<figure><img src="https://images.theconversation.com/files/525653/original/file-20230511-12302-f4puke.jpg?ixlib=rb-1.1.0&rect=17%2C11%2C980%2C652&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Making industry greener -- and stronger</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/concept-environmentally-friendly-production-pond-shaped-2044948658">petrmalinak/Shutterstock</a></span></figcaption></figure><p>UK businesses have criticised the government for the lack of a clear industrial policy. Industry body Make UK has warned the country “<a href="https://www.makeuk.org/insights/reports/industrial-strategy-a-manufacturing-ambition">risks being squeezed</a>” by US and EU green subsidy packages.</p>
<p>Outside the UK, industrial policy <a href="https://theconversation.com/industrial-policy-is-back-on-the-agenda-and-its-never-been-needed-more-than-it-is-now-119120">is back</a> – and in a big way. Around the world, there has been a noticeable shift towards greater government intervention in the economy. </p>
<p>Recent shocks such as the COVID pandemic and the energy price spike arising from the Ukrainian war, have <a href="https://www.weforum.org/agenda/2022/07/supply-chain-disruptions/">led to breakdowns in global supply chains</a> and high inflation. In Europe and the US they also exposed fragility and a lack of resilience – especially in key areas such as <a href="https://theconversation.com/energy-price-freezes-and-business-support-are-sticking-plasters-heres-how-to-protect-uk-families-and-companies-from-future-crises-189406">energy security</a> and the supply of <a href="https://www.somatechnology.com/blog/in-the-news/medical-supply-chain-challenges-and-its-effects-on-healthcare-industries/">medical equipment</a>.</p>
<p>These governments seem to recognise the role of industrial policy in supporting domestic manufacturing to safeguard against future crises, reduce reliance upon Chinese imports, and in dealing with the <a href="https://en.wikipedia.org/wiki/Climate_emergency_declaration">climate emergency</a>. They are also promoting industrial policies to enhance competitiveness, productivity and economic growth.</p>
<h2>New industrial policies</h2>
<p>The US has been the most prominent flag-bearer for these new industrial policies. President Joe Biden’s 2022 <a href="https://www.bbc.co.uk/news/world-us-canada-62457386">Inflation Reduction Act (IRA)</a> allocates <a href="https://www.democrats.senate.gov/imo/media/doc/inflation_reduction_act_one_page_summary.pdf">almost US$700 billion (£555 billion) of federal funding over the next decade</a> to support US industries, particularly healthcare, renewables and clean-tech sectors. </p>
<p>This includes subsidies and tax breaks to US manufacturers and consumers to encourage investment in, and use of, low carbon technologies (such as electric vehicles, heat pumps and carbon capture), as well as semiconductors. There are also new rules to encourage the use of local supplies to support US manufacturing.</p>
<p>The US has also recently enacted the <a href="https://www.whitehouse.gov/briefing-room/statements-releases/2021/11/06/fact-sheet-the-bipartisan-infrastructure-deal/">Bipartisan Infrastructure Deal</a> and the <a href="https://www.ft.com/content/d1e5bb5d-da09-488b-8430-a05d8016a95f">Chips and Science Act</a> to boost transport and communication networks, and promote R&D, especially in regional high-tech hubs. Over the next decade, these three packages are expected to total over <a href="https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-inflation-reduction-act-heres-whats-in-it">US$2 trillion of industrial policy</a> support for US businesses.</p>
<p>Yet, there are concerns that these interventions are protectionist and <a href="https://www.ft.com/content/de1ec769-a76c-474a-927c-b7e5aeff7d9e">violate rules set by the World Trade Organisation (WTO)</a> – the global body that oversees trade between countries – on procurement and subsidies by unduly favouring US firms. The EU has spoken out about the possible impact of the IRA on its own clean-tech industries, particularly in terms of harming its exports and diverting investment away from Europe. </p>
<p>The EU has also questioned <a href="https://www.ft.com/content/9bfe7e7e-83b7-47f2-8d59-e180215d534a">China’s industrial subsidies</a>, possible infringements of intellectual property rights by Chinese companies, and the difficulties European businesses face in operating in China. </p>
<p>To combat these issues, the EU announced its own €250 billion (£217 billion) <a href="https://commission.europa.eu/strategy-and-policy/priorities-2019-2024/european-green-deal/green-deal-industrial-plan_en">Green Deal Industrial Plan</a> in February. This includes relaxing EU state aid rules to allow member states to fast-track investment in green sectors. The emphasis is on support for skills and supply chains, alongside smarter and simpler regulation. </p>
<p>A <a href="https://www.euractiv.com/section/economy-jobs/news/commission-president-eu-sovereignty-fund-will-be-proposed-in-summer/">European Sovereignty Fund</a> is also expected to offer subsidies for clean-tech innovation and infrastructure, while net-zero industry academies will train European workers for the green transition.</p>
<h2>What about the UK?</h2>
<p>One argument put forward for Brexit was that EU state aid rules <a href="https://ukandeu.ac.uk/state-aid-after-brexit/">stifle the ability of the UK to support its industries</a>. But, post-Brexit, how has the UK responded? Its <a href="https://www.independent.co.uk/independentpremium/news-analysis/industrial-strategy-council-government-b1814698.html">industrial strategy was scrapped</a> under the Johnson government. And so far, there has been no policy response to either the US or EU packages. </p>
<p>Indeed, the UK’s net zero initiatives to date have generally <a href="https://acss.org.uk/levelling-up-an-industrial-strategy-perspective/">lacked sufficient funding</a>. The <a href="https://green-alliance.org.uk/wp-content/uploads/2021/11/Getting_the_building_blocks_right.pdf">Green Alliance think tank</a> believes there is a £14.1 billion shortfall in low carbon infrastructure investment in the UK. </p>
<p>The UK’s haphazard approach to net zero has also sometimes conflicted with other policies. For instance, the <a href="https://www.theguardian.com/business/2023/jan/30/eu-plans-to-loosen-state-aid-rules-renewables-investment-tax-credits-biden-green-subsidy">windfall tax on North Sea oil and gas firms</a> applies to some wind and solar electricity generators, discouraging investment in renewables. </p>
<p>At the end of March, Jeremy Hunt said he would <a href="https://www.standard.co.uk/news/politics/government-uk-government-budget-climate-jeremy-hunt-b1070844.html">wait and see what the EU will do</a> on its green industrial policy. It seems the UK position has been to watch as the action unfolds elsewhere – for example on attracting investment to build <a href="https://ukandeu.ac.uk/the-race-for-electric-vehicle-battery-making-is-well-underway-and-the-uk-is-barely-off-the-starting-grid/">battery giga-factories</a>. This is in stark contrast to the US and EU.</p>
<p>The Labour Party has promised to invest £28 billion a year through a dedicated green investment fund and transition programme. This proposal has been <a href="https://www.theguardian.com/politics/2021/oct/01/climate-experts-give-cautious-welcome-to-labours-green-policies">cautiously welcomed by climate experts</a>. But doubts remain about whether the speed and nature of Labour’s proposals will be sufficient for a successful UK <a href="https://www.wwf.org.uk/green-transition">green transition</a>. </p>
<p>Labour has also discussed a <a href="https://www.independent.co.uk/business/labour-plan-to-buy-british-not-about-slapping-a-flag-on-procurement-reeves-b1877867.html">“Buy British” procurement</a> policy. But this approach is also likely to fall foul of existing WTO rules and possibly the <a href="https://commission.europa.eu/strategy-and-policy/relations-non-eu-countries/relations-united-kingdom/eu-uk-trade-and-cooperation-agreement_en#:%7E:text=The%20EU-UK%20Trade%20and%20Cooperation%20Agreement%20concluded%20between,matters%2C%20thematic%20cooperation%20and%20participation%20in%20Union%20programmes">EU-UK Trade and Co-operation Agreement</a>. </p>
<figure class="align-center ">
<img alt="Parcel Boxes with a flag of United Kingdom in a mini shopping cart on a laptop." src="https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=425&fit=crop&dpr=1 754w, https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=425&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/525654/original/file-20230511-17-a6vfh2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=425&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Encouraging British businesses to source parts and services domestically would boost UK industry.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/parcel-boxes-flag-united-kingdom-shopping-1298645047">Fevziie/Shutterstock</a></span>
</figcaption>
</figure>
<h2>The green subsidy race</h2>
<p>The UK needs to get serious about its own “<a href="https://neweconomics.org/about/our-missions/green-new-deal">Green New Deal</a>” if it is to meet its net zero commitments, build low-carbon resilience in its energy supply, and compete with the US, EU and China.</p>
<p>Both the US and EU subsidy schemes should help to accelerate a much needed green transition. They will help to reduce barriers to clean-tech investment and innovation, create new jobs and generate greener growth in those regions. At a global level, this should accelerate decarbonisation and the move to net-zero.</p>
<p>They could also create a <a href="https://www.weforum.org/agenda/2023/03/inflation-reduction-act-eu-green-deal-subsidy-race-consequences/">green subsidy race</a> – with UK not yet even at the starting line.
There is a risk these subsidy schemes will stifle competition, raise global trade tensions and reduce opportunities for developing economies to grow their own clean-tech sectors. </p>
<p>They will also challenge the existing <a href="https://www.wto.org/english/thewto_e/thewto_e.htm">WTO framework</a> and its rules to promote fair and free trade. This could lead to a major reset for the WTO. It may need to adopt a wider remit that aligns global co-operation on free and fair trade with that on climate action. Doing so would enhance the prospects of all countries in this race in delivering sustainable, inclusive and green growth.</p><img src="https://counter.theconversation.com/content/205483/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Phil Tomlinson receives funding from the Engineering and Physical Sciences Research Council (EPSRC) for Made Smarter Innovation: Centre for People-Led Digitalisation, and the Economic and Social Research Council (ESRC) for an Interact project on UK co-working spaces and manufacturing.</span></em></p><p class="fine-print"><em><span>David Bailey receives funding from the ESRC’s UK in a Changing Europe programme.</span></em></p>Can UK business compete in an international green subsidy race?Phil Tomlinson, Professor of Industrial Strategy, Co-Director Centre for Governance, Regulation and Industrial Strategy (CGR&IS), University of BathDavid Bailey, Professor of Business Economics, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2051572023-05-10T14:49:57Z2023-05-10T14:49:57ZCompanies are saying the UK is ‘closed for business’ - here’s how it can become more open<figure><img src="https://images.theconversation.com/files/525233/original/file-20230509-28-th8tmg.jpg?ixlib=rb-1.1.0&rect=693%2C223%2C13853%2C7721&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Bright ideas for British business.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/3d-illustration-british-markets-idea-2094991180">Ayhan Turan/Shutterstock</a></span></figcaption></figure><p><a href="https://www.cnbc.com/2023/05/08/as-arm-shuns-london-tech-investors-question-uk-as-an-ipo-destination.html">Tech sector</a> complaints about the difficulties of doing business in the UK have been repeated more recently by the manufacturing sector. A decade of “<a href="https://www.thetimes.co.uk/article/british-industry-hindered-by-conservative-rule-qxjzkh3wv">flip-flopping</a>” by the government has <a href="https://www.makeuk.org/insights/reports/industrial-strategy-a-manufacturing-ambition">left the UK without an industrial strategy</a>, according to Make UK, which represents industrial and manufacturing employers. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/why-post-brexit-britain-is-still-open-for-business-despite-what-microsoft-says-204698">Why post-Brexit Britain is still open for business – despite what Microsoft says</a>
</strong>
</em>
</p>
<hr>
<p>The UK’s economic future certainly looks a lot brighter than last year, when it was dealing with the aftermath of the <a href="https://theconversation.com/only-a-u-turn-by-the-government-or-the-bank-of-england-will-calm-uk-financial-markets-191523">short but financially calamitous</a> tenure of ex-prime minister Liz Truss. But there’s still concern that the economy will continue to decline. </p>
<p>In early April, the International Monetary Fund’s <a href="https://www.imf.org/en/Publications/WEO/Issues/2023/04/11/world-economic-outlook-april-2023">outlook for 20 major economies</a> predicted the UK would be one of only two G7 economies to contract this year, alongside Germany.</p>
<p>There are worrying parallels with the mid-1970s, when Britain was seen as the “<a href="https://www.economist.com/the-world-ahead/2022/11/18/britain-is-the-sick-man-of-europe-once-again">sick man of Europe</a>” just after joining the European Economic Community. A Financial Times editorial from February suggested the UK is now “<a href="https://www.ft.com/content/d0ddd1b9-731f-42db-b206-af5c5162d7ab">the sick man of the developed world</a>”.</p>
<h2>Reasons for the UK’s decline</h2>
<p>There are a number of possible business-related drivers behind this decline. <a href="https://blogs.lse.ac.uk/businessreview/2022/05/20/improving-productivity-through-better-management-practices/">Some economists believe</a> the quality of management in British companies is the worst in the G7, while thinktank the Institute for Public Policy Research says <a href="https://www.ippr.org/news-and-media/press-releases/uk-business-investment-fell-to-lowest-rate-in-the-g7-after-corporation-tax-cut-to-19-per-cent-ippr-finds">investment by British business</a> has also been among the lowest in the G7 in recent years. This undermines innovation and development that is essential for competitiveness.</p>
<p>Training and education to ensure workers have up-to-date skills is <a href="https://www.forbes.com/sites/adigaskell/2023/05/02/the-decline-in-workplace-training/?sh=40233396272d">no longer regarded as essential</a> by many companies. And finally, the University of Oxford’s <a href="https://migrationobservatory.ox.ac.uk/">Migration Observatory</a> contends the growing reliance on cheap migrant labour from abroad has also <a href="https://migrationobservatory.ox.ac.uk/resources/reports/how-is-the-end-of-free-movement-affecting-the-low-wage-labour-force-in-the-uk/">hobbled UK businesses</a>.</p>
<p>Business confidence and investment are suffering as a result, with implications for jobs and innovation recovery following COVID-19 lockdowns. Leaving the EU has also created <a href="https://www.theguardian.com/uk-news/2022/dec/27/uk-traders-on-brexit-its-increased-paperwork-stress-everything">problems for businesses</a>. Data from <a href="https://www.britishchambers.org.uk/media/get/The%20Trade%20and%20Cooperation%20Agreement%20-%20Two%20Years%20On.pdf">the British Chamber of Commerce demonstrates</a> a growing view that the UK has effectively imposed sanctions on itself.</p>
<p>Further, while the Conservative party once prided itself on listening to business, in recent years it has failed to create much-needed certainty. Major companies <a href="https://www.businessleader.co.uk/uk-businesses-warn-government-must-get-their-house-in-order/">have warned</a> that continued commotion within government could damage prospects for raising additional finance for future growth.</p>
<p>As a former chancellor, the prime minister Rishi Sunak recognises the monumental difficulties of repairing the damage wrought on public finances by COVID, and made worse by the energy crisis caused by Russia’s invasion of Ukraine. But as chancellor, he set in motion plans to <a href="https://www.bbc.co.uk/news/business-64963631#:%7E:text=Plans%20to%20hike%20corporation%20tax%20to%2025%25%20were%20first%20put%20forward%20by%20Rishi%20Sunak%20two%20years%20ago%2C%20when%20he%20was%20chancellor%20under%20Boris%20Johnson.">raise corporation tax from 19% to 25%</a>.</p>
<p>Sunak justifies this tax rise as essential to restoring integrity to the management of public finances – but it jettisons <a href="https://www.conservatives.com/our-plan/economy#:%7E:text=back%20businesses%20with-,lower%20taxes,-%2C%20better%20infrastructure%20and">a pledge to lower taxes</a> that is central to Conservative ideology.</p>
<figure class="align-center ">
<img alt="UK Prime Minister Rishi Sunak waving outside 10 Downing Street." src="https://images.theconversation.com/files/525237/original/file-20230509-19-mc0vky.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/525237/original/file-20230509-19-mc0vky.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=344&fit=crop&dpr=1 600w, https://images.theconversation.com/files/525237/original/file-20230509-19-mc0vky.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=344&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/525237/original/file-20230509-19-mc0vky.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=344&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/525237/original/file-20230509-19-mc0vky.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=433&fit=crop&dpr=1 754w, https://images.theconversation.com/files/525237/original/file-20230509-19-mc0vky.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=433&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/525237/original/file-20230509-19-mc0vky.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=433&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Rishi Sunak assumed office in October 2022 following a short but disastrous tenure by Liz Truss.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-united-kingdom-october-25-2022-2219757065">I.T.S./Shutterstock</a></span>
</figcaption>
</figure>
<h2>Boosting British business again</h2>
<p>The remainder of this year and early 2024 will see all political parties explaining how they intend to deal with these impediments to economic growth. This is likely to include cutting regulations and increasing support for green investment. But what else needs to be addressed?</p>
<p>One major task will be to encourage infrastructure investment, to improve the woefully inefficient movement of goods and people within the UK. This is especially important since massive delays and overspending mean <a href="https://news.sky.com/story/jeremy-hunt-championing-brexit-freedoms-and-hs2-muddle-shows-gap-between-what-government-says-and-what-it-can-actually-deliver-12796940">HS2 is unlikely to be the silver bullet</a> needed to encourage business investment outside of London and Birmingham. </p>
<p>In addition, the UK’s tax regime is archaic and confusing, and its stock market listing rules are seen as cumbersome and expensive. UK regulator the <a href="https://news.sky.com/story/fca-launches-consultation-paper-to-shake-up-stock-exchange-listing-rules-12871584">Financial Conduct Authority has proposed changes</a>, but businesses including <a href="https://www.theguardian.com/business/2023/mar/03/uk-chip-designer-arm-chooses-us-only-listing-in-blow-to-rishi-sunak">chip manufaturer Arm</a> have already decided to list elsewhere. Smaller companies operating without any additional capacity to cope with change or new rules could also quickly become frustrated with the bureaucracy.</p>
<p>And although there are many investors and businesses that are exemplary in their approach to investment and treatment of their workers, some <a href="https://www.theguardian.com/business/2023/feb/11/they-havent-the-foggiest-who-we-are-the-watchdog-fighting-to-protect-britains-exploited-workers">avail of lax regulation</a> to engage in exploitation. As the Salvation Army reported last year, “modern slavery” is <a href="https://www.salvationarmy.org.uk/news/criminal-gangs-tighten-grip-modern-slavery-uk">on the rise in this country</a>.</p>
<p>Concerns also continue about so-called “<a href="https://theconversation.com/the-zombie-company-problem-and-what-it-means-for-our-economies-podcast-158544">zombie companies</a>”, which <a href="https://www.telegraph.co.uk/business/2022/08/21/apocalypse-arrives-zombie-companies-haunting-uk-growth/">merely survive</a> through reliance on time-consuming effort and public finance. On the other hand, rising returns by companies that have benefited from the current economic environment – <a href="https://theconversation.com/why-energy-companies-are-making-so-much-profit-despite-uk-windfall-taxes-199523">energy majors, for example</a> – have <a href="https://www.bbc.co.uk/news/business-60295177">raised questions about</a> what is fair and how much tax should be paid by many companies. </p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/uk-energy-windfall-tax-what-it-is-and-why-it-needs-to-change-193483">UK energy windfall tax: what it is and why it needs to change</a>
</strong>
</em>
</p>
<hr>
<h2>Business-friendly fixes</h2>
<p>The solutions are well understood and often broadly accepted, starting with a simpler and more logical tax system. Random dumping of EU legislation, particularly food and environmental standards, is also increasingly recognised as damaging for the country. As Sunak seems to recognise, having <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1138989/The_Windsor_Framework_a_new_way_forward.pdf">agreed the Windsor Framework</a>, it’s better to improve relations with the EU and work with it to streamline rules on trade. </p>
<p>Equally, as the pandemic showed, there are radically different ways to live. This includes having homes that are more energy efficient and suitable for both living and working. Addressing <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-7671/#:%7E:text=As%20noted%20above%2C%20research%20commissioned,homes%20each%20year%20to%202031.">the urgent need for affordable homes</a>, particularly for younger workers who are priced off the housing ladder and excluded from the rental sector, will support the future workforce.</p>
<p>The UK needs its policymakers to be far more adventurous and understanding of, not just contemporary requirements of business, but change that has not yet occurred. Former senior civil servant and now chief-executive of Make UK, Stephen Phipson, contends that successive governments have been hooked on “<a href="https://www.thetimes.co.uk/article/3f50f2ac-eda8-11ed-b02d-cefaa3091195">short-term quick fixes</a>”. He says greater stability is essential for businesses to prosper, and for the collective good. </p>
<p>As the most successful businesses, particularly <a href="https://www.ft.com/content/5466b46d-9cb4-479f-bf5a-1bd15783eb22">technology firms</a>, demonstrate, constant enquiry and innovation is non-negotiable. But this applies to countries too. It is unlikely to happen, though, under the current government’s “what will work today?” approach.</p><img src="https://counter.theconversation.com/content/205157/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven McCabe does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>A long-term view on building up British business is key to showing the UK is ‘open for business’.Steven McCabe, Associate Professor and political economist, Birmingham City UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/2031952023-04-06T09:36:50Z2023-04-06T09:36:50ZWhy Britain’s new CPTPP trade deal will not make up for Brexit<figure><img src="https://images.theconversation.com/files/519298/original/file-20230404-14-172rmi.jpg?ixlib=rb-1.1.0&rect=16%2C7%2C973%2C432&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">UNIKYLUCKK/Shutterstock</span></span></figcaption></figure><p>The UK <a href="https://www.gov.uk/government/collections/the-uk-and-the-comprehensive-and-progressive-agreement-for-trans-pacific-partnershipcptpp">recently announced</a> that it will join the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), giving British businesses access to the 11 other members of the Indo-Pacific trade bloc and bringing its combined GDP to £11 trillion.</p>
<p>Some commentators have suggested the deal could make up for Brexit. It’s been called “<a href="https://iea.org.uk/media/cptpp-membership-will-boost-british-producers-and-consumers/">a momentous economic and strategic moment</a>” that “<a href="https://www.telegraph.co.uk/business/2023/03/31/britain-cptpp-trade-deal-end-rejoiner-dream/">kills off any likelihood that it [the UK] will ever rejoin the EU customs union or single market</a>”. Shanker Singham of think tank the Institute of Economic Affairs has even said: “<a href="https://iea.org.uk/the-uk-joining-cptpp-is-a-seismic-moment-for-the-global-trading-system/">it’s no exaggeration to say that CPTPP+UK is an equivalent economic power to the EU-28-UK</a>”, comparing it to a trade deal between the UK and EU members.</p>
<p>UK business and trade secretary <a href="https://uk.news.yahoo.com/forget-brexit-pain-back-pacific-110357213.html?guccounter=1&guce_referrer=aHR0cHM6Ly93d3cuZ29vZ2xlLmNvbS8&guce_referrer_sig=AQAAAK3HWr0ZFmy82Gqbc4XcmRBzKRsZecgOYZhp8ckmsrAEkeeXj78loWi5j5Ku8tzOrcbuyBmlHjaEYhMXLXJm1zL5UEKRF_cwa4vAgdKz6rMeGEpD667Do_rCpRHnC_4cAG7eEs1eqcZJimKn4idSIaKL_7UwcomxZj02zInKj7X1">Kemi Badenoch echoed</a> such sentiments, telling Times Radio:</p>
<blockquote>
<p>We’ve left the EU so we need to look at what to do in order to grow the UK economy and not keep talking about a vote from seven years ago.</p>
</blockquote>
<p>The problem with this fanfare is that the government’s own economic analysis of the benefits of joining this bloc is underwhelming. There is an estimated gain to the UK of <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1027860/dit-cptpp-uk-accession-strategic-approach.pdf">0.08% of GDP</a> – this is just a 50th of the <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1027860/dit-cptpp-uk-accession-strategic-approach.pdf">OBR’s estimate of what Brexit has cost the UK economy to date</a>. Even for those that are <a href="https://www.bloomberg.com/news/articles/2022-11-01/uk-minister-questions-watchdog-forecasts-in-echo-of-truss-era?leadSource=uverify%20wall">sceptical about models and forecasts</a>, that is an enormous difference in magnitude.</p>
<p>Of course, the CPTPP is expected to offer the UK some real gains. It certainly provides significant potential opportunities for some individual exporters. But the estimated gains for Britain overall are very small.</p>
<p>The main reason for this is that, apart from Japan, the major players of the global economy are not in the CPTPP. The US <a href="https://www.wsj.com/articles/america-tpp-china-japan-indo-pacific-trade-influence-11632931688">withdrew from the Trans Pacific Partnership</a> (the CPTPP is what the remaining members formed without it). And China <a href="https://www.scmp.com/economy/china-economy/article/3176487/what-cptpp-and-why-china-eager-join">started negotiations to join</a> in 2022, but current geopolitics now make its entry highly improbable. India was never involved.</p>
<p>In addition, the UK already has free trade agreements with nine out of the 11 members. The remaining two, <a href="https://news.sky.com/story/trade-secretary-kemi-badenoch-says-palm-oil-is-great-product-after-deal-criticised-for-endangering-orangutans-12846290">Malaysia</a> and <a href="https://wits.worldbank.org/trade/comtrade/en/country/BRN/year/2019/tradeflow/Exports/partner/ALL/product/151190">Brunei</a>, are controversial due to environmental threats from palm oil production to rainforests and orangutans.</p>
<p><strong>Britain’s existing trade agreements with CPTPP members</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/519096/original/file-20230403-28-v6040o.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="A table listing the existing British trade agreements with CPTPP members." src="https://images.theconversation.com/files/519096/original/file-20230403-28-v6040o.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/519096/original/file-20230403-28-v6040o.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=253&fit=crop&dpr=1 600w, https://images.theconversation.com/files/519096/original/file-20230403-28-v6040o.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=253&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/519096/original/file-20230403-28-v6040o.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=253&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/519096/original/file-20230403-28-v6040o.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=318&fit=crop&dpr=1 754w, https://images.theconversation.com/files/519096/original/file-20230403-28-v6040o.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=318&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/519096/original/file-20230403-28-v6040o.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=318&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption"></span>
<span class="attribution"><a class="source" href="https://comtradeplus.un.org/TradeFlow">Author provided using GDP data from the World Bank and trade data from UN Comtrade.</a></span>
</figcaption>
</figure>
<p>And despite the widespread public perception of the Asia-Pacific area as a hub of future growth, the performance and prospects of the CPTPP members are a mixed bag. The largest member, Japan, is arguably in <a href="https://www.cnbc.com/2023/02/14/japan-economy-averts-recession-but-rebounds-less-than-expected-in-q4.html">long-term decline</a>, as is <a href="https://thescoop.co/2022/10/24/record-low-oil-output-drags-brunei-economy-deeper-into-recession/">Brunei</a>, while just three members (<a href="https://tradingeconomics.com/vietnam/full-year-gdp-growth#:%7E:text=Full%20Year%20GDP%20Growth%20in%20Vietnam%20averaged%205.89%20percent%20from,Vietnam%20Full%20Year%20Gdp%20Growth.">Vietnam</a>, <a href="https://tradingeconomics.com/singapore/gdp-growth-annual">Singapore</a> and <a href="https://tradingeconomics.com/new-zealand/gdp-growth-annual#:%7E:text=New%20Zealand's%20economy%20expanded%20by,the%20service%20(3.9%20percent%20vs.)">New Zealand</a> had average growth in the last decade above 3% annually. </p>
<p>Finally, distance really does matter in trade. All the CPTPP members are thousands of miles from the UK, which explains their relatively small shares in UK trade at present. </p>
<h2>Some benefits of CPTPP</h2>
<p>While all of these points pour cold water on the suggested gains, there are some potential benefits from the CPTPP agreement, which allows for mutual recognition of certain standards. This includes patents and some relaxation of sanitary and phytosanitary rules on food items. </p>
<p>However, agreements over standards will involve the UK submitting to international CPTPP courts on these issues. This sits uncomfortably with many of the <a href="https://www.lawsociety.org.uk/topics/brexit/what-is-the-european-court-of-justice-and-why-does-it-matter">“sovereignty” objections to the European Court of Justice</a> in relation to Brexit (largely from many of those who have extolled the CPTPP). It’s also notable that out of the nine agreements with CPTPP members that existed before the UK signed this deal, all but two are rollovers of previous EU deals. </p>
<p>But a trade deal with the CPTPP is worth more to the UK than separate deals with each member due to requirements around “<a href="https://www.wto.org/english/tratop_e/roi_e/roi_info_e.htm">rules of origin</a>”, which determine the national source of a product. When a product contains inputs from more than one country, a series of separate free trade agreements may not eliminate tariffs. But if all the relevant countries are members of a single free trade agreement, then rules of origin on inputs from other members cease to be a problem (although there might be some issues if some members do not police the requirements properly). </p>
<h2>Not the ideal agreement</h2>
<p>While these benefits should be recognised, we should also acknowledge that the CPTPP is not the ideal agreement for Britain. As stated above, distance really does matter in trade – this is <a href="https://ideas.repec.org/p/cpr/ceprdp/9322.html">overwhelmingly accepted by modern trade economists</a>. </p>
<p>Research shows that the rate at which trade declines with distance has <a href="http://www.cepii.fr/pdf_pub/wp/2016/wp2016-14.pdf">barely changed over more than a century</a>. This might seem strange because <a href="https://ourworldindata.org/grapher/real-transport-and-communication-costs">transport costs have fallen over time</a>. But, as transport and communications have improved, firms have outsourced much of their production to complex supply chains that often cross national borders many times, with “<a href="https://www.gep.com/knowledge-bank/glossary/what-is-just-in-time-supply-chain-strategy#:%7E:text=What%20is%20the%20just%2Din,is%20stockpiled%2C%20reducing%20storage%20costs.">just-in-time</a>” supply schedules to keep down the costs of holding large stocks. </p>
<p>This means that, while trade everywhere has grown, there is still a big premium for trading (many times) across borders between contiguous countries. It is exactly this type of trade which benefits most from big comprehensive trade agreements that simplify rules of origin and regulatory paperwork. </p>
<p>This suggests that, while some elements of the the CPTPP offer benefits to the UK, it is unlikely to boost its trade in the way it does between countries around the Pacific Rim. For this sort of boost, the UK really needs to look towards its own neighbours. Of course, this is just the sort of agreement that Badenoch seems reluctant to discuss.</p><img src="https://counter.theconversation.com/content/203195/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>While there are some benefits to the free trade agreement, the UK would be better off striking a deal with its neighbours.Terence Huw Edwards, Senior Lecturer in Economics, Loughborough UniversityMustapha Douch, Assistant Professor in Economics, The University of EdinburghLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1994742023-02-23T06:15:25Z2023-02-23T06:15:25ZClass and the City of London: my decade of research shows why elitism is endemic and top firms don’t really care<p>During the COVID pandemic, as most wages <a href="https://commonslibrary.parliament.uk/what-happened-to-wages-in-the-coronavirus-pandemic/#:%7E:text=Since%20November%202020%2C%20wages%20have,November%202020%20and%20December%202021.">stagnated</a>, workers in the City of London were enjoying <a href="https://www.theguardian.com/business/2022/jun/11/what-cost-of-living-crisis-bumper-executive-bonuses-make-a-comeback">bumper pay packets</a>. Average partner salaries in one corporate law firm <a href="https://www.thetimes.co.uk/article/lawyers-lead-the-way-as-million-pound-salaries-rain-down-on-the-city-rdmxjfs67">exceeded £2 million</a> for the first time. Investment bankers received their <a href="https://www.theguardian.com/business/2022/feb/16/weve-had-a-run-on-champagne-biggest-uk-banker-bonuses-since-financial-crash">highest bonus payouts</a> since 2008.</p>
<p>City bosses have long justified these exceptional rewards by claiming that they are available to anyone with sufficient intellect and willingness to work hard – regardless of their gender, ethnicity or social class. In the <a href="https://www.goldmansachs.com/our_firm/investor_relations/financial_reports/annual_reports/2003/pdf/GS03AR_businessprncples.pdf">words of Goldman Sachs</a>, one of the City’s most iconic players:</p>
<blockquote>
<p>Advancement depends on merit … For us to be successful, our people must reflect the diversity of the communities and cultures in which we operate. That means we must attract, retain and motivate people from many backgrounds and perspectives. Being diverse is not optional; it is what we must be.</p>
</blockquote>
<p>But studies tell a different story about the City of London’s culture and demographics. In October 1986, the “<a href="https://en.wikipedia.org/wiki/Big_Bang_(financial_markets)">Big Bang</a>” – the name given to the sudden deregulation of financial markets to enhance London’s status as a global financial centre – was also supposed to signal the creation of a new, <a href="https://www.bbc.co.uk/news/business-37751599">more egalitarian</a> City. Yet four decades on, <a href="https://www.thebridgegroup.org.uk/news/partner-law">research</a> <a href="https://static1.squarespace.com/static/5c18e090b40b9d6b43b093d8/t/5f6c69ea4d0d1b29037581f3/1600940523386/BG_SEB_Partner_Law_Sep2020_SUMMARY_FINAL.pdf">shows</a> that more than half of all partners at the leading law firms are white, male and privately educated, while more than 90% of bosses at eight top financial service firms are from society’s most privileged backgrounds – a demographic that comprises just over 30% of the entire UK population.</p>
<p>I began <a href="https://www.researchgate.net/publication/293014505_Understanding_social_exclusion_in_elite_professional_service_firms_field_level_dynamics_and_the_%27professional_project">researching</a> this <a href="https://bristoluniversitypress.co.uk/highly-discriminating">issue</a> more than ten years ago, after briefly working in business development for a City law firm. Despite being appointed in almost equal numbers to men, women were significantly under-represented at the firm’s senior levels, comprising fewer than 20% of its partners. There was also a striking lack of ethnic diversity among all staff, and it was especially rare to see any black lawyers.</p>
<p>Soon after I joined, I was offered a session with a style consultant who, my manager explained, would help me appear “more professional”. The consultant’s primary advice was to wear more make up and put on skirt-suits.</p>
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<img alt="" src="https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption"></span>
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<p><strong><em>This article is part of Conversation Insights</em></strong>
<br><em>The Insights team generates <a href="https://theconversation.com/uk/topics/insights-series-71218">long-form journalism</a> derived from interdisciplinary research. The team is working with academics from different backgrounds who have been engaged in projects aimed at tackling societal and scientific challenges.</em></p>
<hr>
<p>In any industry where people are regularly spotlighted as a firm’s most important resource, hiring staff for any other reason than their ability might appear to make little sense. In the City, however, white middle-class men have always been particularly valued for other qualities.</p>
<p>Consider this exchange I had with asset manager Toby* in 2019. I started by asking on what basis his clients selected their financial advisers, to which he replied: “They have expectations of meeting people with expertise, really.”</p>
<p>But when I asked how they assess this expertise, Toby said it was “a difficult question”:</p>
<blockquote>
<p>I think they’re choosing us basically on whether they like the sound of us or the look of us. Most of our sales force is [made up of] white, middle-class males … Let’s try a thought experiment. If we turned up with, I don’t know, a black woman and a white bloke, but a bit spivvy with an Essex accent … Yeah, I don’t know. I really don’t know. God, that sounds really bad.</p>
</blockquote>
<p>Many City executives have told me that a certain type of “social ease”, often cultivated at private schools, allows colleagues to get away with bullshit and bluff. Or as one senior executive at a FTSE 100 firm put it:</p>
<blockquote>
<p>We all know that people with the right accent and mannerisms … sound much more believable. Equally, I want to say that we can see through that – but the truth is, we can’t.</p>
</blockquote>
<h2>‘We give the jobs to other posh people’</h2>
<p>Many of my interviews were conducted in the late 2010s, a time when “diversity and inclusion” was a buzz phrase among elite City firms. I was keen to find out how serious these firms – spanning finance, legal services, management consulting, accounting and auditing – were about changing the social makeup of their staff, particularly those earning the biggest bucks.</p>
<p>Prestigious City firms, some with billion-pound revenue streams, have long tried to position themselves as “<a href="https://www.ft.com/content/376f3374-cf1e-4923-8c24-e4dbafe70b6d">money meritocracies</a>”, where success and promotion is based purely on an employee’s performance and the profits they generate.</p>
<p>Privately, however, City insiders I spoke to repeatedly blamed deviations from this rule on outright favouritism. One hedge fund manager, Michael, confided: “It’s easy to explain. Basically, we give the top jobs to other posh people who are our mates.”</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Four white men in suits walking away from the camera" src="https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=504&fit=crop&dpr=1 754w, https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=504&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/509253/original/file-20230209-16-4q8zqk.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=504&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Businessmen in the City of London financial district.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-20-april-2019-business-1822728791">I.R. Stone/Shutterstock</a></span>
</figcaption>
</figure>
<p>Investment manager James said that frequently, recruitment and promotion “becomes a subjective call”, at which point decision-makers typically revert to type. I asked him what “type” that might be:</p>
<blockquote>
<p>Myself … I’m already doing that role and I know what I’m doing. Therefore, I’m more likely to go towards the sort of people who are like I am, which is why you end up with the stereotypical male – mid-40s, white. It’s why the profession’s full of them.</p>
</blockquote>
<p>To date, efforts to diversify according to gender and ethnicity appear to have had very limited results. In 2014, <a href="https://www.suttontrust.com/our-research/pathways-banking-education-background-finance/">The Sutton Trust</a> found that within <a href="https://www.theglobalcity.uk/financial-professional-services">financial services</a>, more than 60% of bosses educated in the UK had attended private schools, as opposed to just 7% of the population at large. And despite many interventions designed to improve representation of women at senior levels, a <a href="https://www.fnlondon.com/articles/under-10-of-top-city-dealmakers-are-women-its-still-very-testosterone-fuelled-20200810">2020 study</a> of the City’s top “deal-makers” in investment banks found that less than one in ten were women.</p>
<p>I believe that City firms’ efforts to become more diverse and inclusive, and to deliver more equal representation at the top, have not worked <em>because they were never meant to</em>. Instead, they are a form of “reputation laundering”, offering only the illusion of change in order to protect their privileges and rewards. This conclusion is based on my interviews with more than 400 City leaders and workers – among them diversity experts and human resource managers charged with trying to change the culture of this rarefied world.</p>
<h2>The phoney ‘war for talent’</h2>
<p>Class-based recruitment strategies are perceived to offer City firms certain benefits – in particular, sustaining the impression of status and prestige to competitors, clients, potential colleagues and even policymakers. This in turn helps justify the high fees they charge, and the exceptional profits they generate.</p>
<p>Defining employee “talent” in narrow terms creates an artificial impression of scarcity in available skills. At entry level, City firms battle to attract graduates from the UK’s most elite universities. This “war for talent” is largely phoney – in reality, the skills the firms need are available from a much wider cohort of graduates – but it has helped convince both City firms and clients of these employees’ exceptional worth.</p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Three Black men in suits chatting outside an office building" src="https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=406&fit=crop&dpr=1 600w, https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=406&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=406&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=510&fit=crop&dpr=1 754w, https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=510&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/509254/original/file-20230209-26-2cg6g6.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=510&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Non-white employees are typically much less likely to reach client-facing executive roles.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-20-april-2019-business-1819187273">I.R. Stone/Shutterstock</a></span>
</figcaption>
</figure>
<p>This narrative was invoked in the wake of the 2008 financial crisis when, despite being closely implicated in this catastrophic collapse, <a href="https://www.ft.com/content/d4f02d66-1d84-11e0-a163-00144feab49a">top bankers argued</a> against punitive regulation on the basis that it would drive “scarce” UK financial talent <a href="https://www.newstatesman.com/politics/2011/06/banks-threats-tax-government">to other countries</a>. More recently, it was used to justify the <a href="https://www.theguardian.com/business/2022/oct/14/bankers-bonuses-double-since-2008-crash-tuc-study-finds">very large bonuses</a> paid out to UK bankers in 2022 amid the growing cost of living crisis.</p>
<p>One law firm partner explained why his firm preferred to appoint “polished” candidates from elite universities, in preference to the very best who might be educated elsewhere:</p>
<blockquote>
<p>From a business perspective, you can’t afford to have people in meetings who will not look good to the clients, [even if] some might be very, very bright.</p>
</blockquote>
<p>In part, this can be explained by City managers adopting a risk-averse strategy to recruitment. In the context of a considerable oversupply of job applications, a “good” degree from an “elite” university acts as an easy signal of probable competency. As asset manager Reena explained:</p>
<blockquote>
<p>If we hire somebody from a completely different background and they don’t work out, the person who hires them is going to look like a fool. [Whereas] if we continue to hire the exact same type of person – the Oxbridge-educated white male, for argument’s sake – and that person doesn’t work out, which often happens, nobody will blame the hiring manager for making that decision.</p>
</blockquote>
<p>Leigh, a former <a href="https://www.investopedia.com/terms/t/trader.asp#:%7E:text=A%20trader%20is%20an%20individual,the%20person%20holds%20the%20asset.">City trader</a>, describes himself as a working-class “<a href="https://en.wikipedia.org/wiki/Barrow_boy">barrow boy</a>”. He said that following the Big Bang in 1986, the City’s banks all started saying they had to recruit “only the best” university students:</p>
<blockquote>
<p>They came from Oxford or Durham or wherever – anywhere that looked good and if they could bullshit their way in … Some of them were good, but not all. They’d come in as graduates and have to learn on the job, but they had no common sense.</p>
</blockquote>
<p>This is not to say that the City has no diversity at all. But demographics differ between job roles, and class differences are most tolerated in more technical or “quantitative” roles such as trading, where performance can be more objectively measured and perceived success does not depend on personal relationships with clients. However, even these roles remain dominated by men, while diversity is considerably more likely in less prestigious and often lower-paid <a href="https://www.investopedia.com/terms/m/middleoffice.asp#:%7E:text=What%20Is%20the%20Middle%20Office,technology%20(IT)%20as%20well.">middle</a>- and <a href="https://www.investopedia.com/terms/b/backoffice.asp#:%7E:text=What%20Is%20Back%20Office%3F,%2C%20accounting%2C%20and%20IT%20services.">back-office</a> jobs.</p>
<h2>The City’s way of ‘doing diversity’</h2>
<p>In the early 2010s, when diversity and inclusion agendas were still quite new, Liam, a black corporate lawyer, sounded somewhat cynical when I spoke to him about the sincerity of these strategies:</p>
<blockquote>
<p>Their dream scenario is to try and find a nice, uncontroversial way to try and ‘do diversity’ without having to change much of anything else.</p>
</blockquote>
<p>Several years after that, Gus, a partner at one of the “big four” accountancy firms, reflected on why they had adopted these diversity agendas:</p>
<blockquote>
<p>Why does anything like this become popular? I guess we were quite influenced by what other firms were doing around the same time – and that’s probably still true today … It was just the buzz in the City at the time.</p>
</blockquote>
<p>While some firms have made efforts to become more diverse in their higher-profile, client-facing and revenue-generating jobs, when it comes to social class the focus has largely been on access rather than career progression. Thousands of young people, generally aged between 16 and 21 and from working-class backgrounds, have taken part in these <a href="https://www.researchgate.net/publication/350590737_Organisational_Social_Mobility_Programmes_as_Mechanisms_of_Power_and_Control">social mobility programmes</a> – often conducted with charities such as the Social Mobility Foundation, UpReach, the Sutton Trust and the City Brokerage.</p>
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<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/londons-skyscrapers-tell-a-rich-story-about-the-citys-worship-of-finance-69743">London's skyscrapers tell a rich story about the City's worship of finance</a>
</strong>
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<p>This seems positive and in one sense it is. I have interviewed several hundred of these students as they aim to secure a career in investment banking or with other financial and professional service firms. Many described these opportunities as “life changing”, telling me uplifting stories of their experiences as they first engaged with the City – sometimes while still at school.</p>
<p>Aspirant banker Max explained how everything about the City seemed to him “oversized” – from the office buildings to the furniture that fills them:</p>
<blockquote>
<p>I mean, you’re in this massive building with these massive tables and chairs, and really awesome decor and art, and there’s people who are really well spoken and really professional in their suits.</p>
</blockquote>
<p>Rahul sounded similarly awestruck as he described how growing up, he had seen the City from a distance but never expected to find himself there:</p>
<blockquote>
<p>My father was a greengrocer. We used to go to the market and [on the way] we’d be able to see the City … I used to literally stand and stare over and imagine what it would be like to be there. To fast-forward a couple of years and be able to be at the [bank’s] office was quite amazing.</p>
</blockquote>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Skyscrapers in the City of London" src="https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=338&fit=crop&dpr=1 600w, https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=338&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=338&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=424&fit=crop&dpr=1 754w, https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=424&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/509260/original/file-20230209-16-lwm7wz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=424&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The City of London skyline: ‘I used to stand and stare …’</span>
<span class="attribution"><a class="source" href="https://pixabay.com/photos/skyline-london-financial-district-4587051/">Waid1995/Pixabay</a></span>
</figcaption>
</figure>
<p>Participants of these schemes were frequently told that, given the City’s “meritocratic culture”, they should have high expectations of getting in. As Emily put it: “They say all the time: it doesn’t matter who you are, you can do anything as long as you work hard enough.”</p>
<p>Sam described having learnt that: “Anybody could become the CEO of a major bank. It’s just all about sacrifice … To do well, to rise up the ranks, it’s definitely the people that are the hardest working.”</p>
<p>Yet the reality for these working-class interns could soon feel very different. On entering mainstream graduate recruitment programmes, some told me they quickly discovered that “merit is a myth”. When we spoke in 2019, bank intern Mishal, a black woman in her early twenties from a working-class background, described her experience in visceral terms:</p>
<blockquote>
<p>What those people have been telling you [about diversity] is just the corporate crap that everybody vomits from their mouths … If you’d interviewed me [before] I probably would have said all those things. But now that I’ve actually been in a bank and seen it – I kept saying to my friends over the summer: “I have been sold dreams.”</p>
</blockquote>
<p>Mishal’s disillusionment was striking. “[They’ve] told me one thing and then I’ve come in and it’s a complete opposite other thing,” she complained. “Your motivation has to be so strong, because everything they tell you turns out not to be true.”</p>
<p>Some of the interns I met felt very self-conscious of their “different” appearance and demeanour, compared with the image that is so carefully cultivated by these City firms. Kasia described one of her encounters during an internship at an investment bank:</p>
<blockquote>
<p>My team had sent me to a meeting with about 40 white, middle-aged men. There was not a single female in the room … No one was below 35, 40 years old … I was just trembling with fear – like, I’m not valuable in this room.</p>
</blockquote>
<p>Many interns said they felt strong pressure to assimilate while navigating sometimes hostile and frightening cultures. Kasia described making efforts to change her look and accent, adding:</p>
<blockquote>
<p>I don’t want to be viewed as a social experiment who’s come, like, from the street … I want to be judged based on my abilities.</p>
</blockquote>
<p>Young people like Kasia and Mishal are far from victims and would not wish to be seen as such – although neither went on to be offered a graduate job. However, it is clear that for some young interns, assimilation into the City of London is impossible – especially where class intersects with ethnicity.</p>
<p>Nor are these problems restricted to entry-level recruitment, as evidenced by lower retention rates and slower career progression for those who are employed. A <a href="https://static1.squarespace.com/static/5c18e090b40b9d6b43b093d8/t/5fbc317e96e56f63b563d0f2/1606168962064/Socio-economic_report-Final.pdf">2020 study</a> of eight major financial services firms found that employees from less privileged backgrounds took 25% longer to progress, despite no evidence of poorer performance. Describing how your educational background can cast a shadow over a whole career, asset manager Euan told me, only half-jokingly: “It’s like if you went to an ex-poly – in the City that comes with a lifetime of shame!”</p>
<p>Tanya, a black woman working for a City finance firm, graduated from a leading <a href="https://russellgroup.ac.uk/about/">Russell Group university</a> but still described the barriers – some blatant, others more subtle – that she felt had delayed her career progression within the firm:</p>
<blockquote>
<p>It’s difficult to exactly know the impact because a lot of it’s quite subtle. But I’m always, always focusing on creating the right impression, the right amount of assertiveness … It’s exhausting and there’s less energy to focus on work. But you never want to come across as the “angry black woman”, so even when there is more blatant discrimination, it’s too dangerous to complain.</p>
</blockquote>
<h2>The myth of merit</h2>
<p>Many people are taken in by the City’s “myth of merit” – not least some of its top bosses, who prefer to believe their own positions are based on exceptional talent and hard work, rather than any inherited privilege. Attempts I have made to question this narrative, both during informal conversations and formal interviews, have sometimes met with robust responses. As corporate lawyer Kris said when we spoke a few years ago:</p>
<blockquote>
<p>I came from a relatively humble background myself and I got into the system … I think they would be quite offended if you said the major City firms were unmeritocratic. I would be offended.</p>
</blockquote>
<p>And indeed, some working-class figures have acquired legendary status. In his <a href="https://www.theguardian.com/books/2010/jan/30/city-london-david-kynaston">biography of the City of London</a>, historian David Kynaston profiles several, including John Hutchinson – a “brash whiz-kid” who took on a key role trading gilts at <a href="https://www.nytimes.com/1986/09/28/business/merrill-lynch-s-london-blitz.html">Merrill Lynch</a>. Playing up the successes of such figures has helped to support the City’s meritocratic narratives.</p>
<p>The emphasis on merit also helps cement the impression that these firms are engaged in highly complex work that only the very smartest people can do. In her <a href="https://www.dukeupress.edu/liquidated">superlative work</a> exploring the City’s US equivalent, Wall Street, anthropologist Karen Ho shows how this exaggerated narrative helped situate investment bankers as the epitome of control and technical competency, offering them a “naturalised” right to their place near the top of the social order – both in terms of earnings and status.</p>
<figure>
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<figcaption><span class="caption">The Big Bang in 1986 changed the culture of the City – but its elitist image has endured despite calls for change.</span></figcaption>
</figure>
<p>Similarly, in London since the <a href="https://www.bbc.co.uk/news/business-37751599">Big Bang</a>, a discourse of “smartness” (of intellect) has become central to the image of investment bankers and other City professionals. This means financial rewards which far outstrip most other sectors’ pay levels can be justified on the basis that they are fairly allocated to “only the brightest and best”.</p>
<p>Many City workers <em>are</em> exceptionally qualified and also very bright. By the 2010s, new entrants to investment banks in the UK were typically among the top 1% of performers in A-levels or equivalent. Corporate lawyer, Rob, explained that while in the old days “it didn’t really matter if you were a bit dim”, the <a href="https://www.independent.co.uk/news/business/analysis-and-features/the-day-big-bang-blasted-the-old-boys-into-oblivion-422005.html">arrival of the American banks</a> in the wake of the Big Bang led to a more “intensive, more competitive style of work … more of a meritocracy”.</p>
<p>However, the City’s highly remunerated jobs are still overwhelmingly done by white men who have benefited from a private school education – the children of the affluent middle and upper classes. Furthermore, if any unfair recruitment practices or treatment of employees come to light, City firms typically employ the shield of “<a href="https://www.nytimes.com/2019/11/20/style/diversity-consultants.html">unconscious bias</a>” to explain away any discrepancies in staff makeup or treatment.</p>
<p>This response can suggest a sort of “no-fault discrimination” where since everybody is to blame, nobody is. Some academics <a href="https://scholar.harvard.edu/iris_bohnet/what-works">argue</a> that putting a heavy focus on unconscious bias reflects a misguided, highly individualised response to what is actually a systemic, structural problem.</p>
<p>But in the City of London, my research shows that discrimination is also, in part, a conscious choice that offers systematic advantages for more privileged groups – while supporting an image of “desirable elitism”. And where this is the case, City firms prefer us to look away.</p>
<figure>
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<figcaption><span class="caption">Ian Clarke came through HSBC’s management training scheme in 2008, but resigned from his job in global sales in 2021 after writing a report about the bank’s lack of diversity.</span></figcaption>
</figure>
<p>Investment banks are characterised by opacity and secrecy – sometimes justified by their need to to maintain a “competitive advantage”. But the related use of <a href="https://en.wikipedia.org/wiki/Non-disclosure_agreement">non-disclosure agreements</a> for employment contracts has meant that many discrimination cases involving City firms have never seen the light of day.</p>
<p>Where this was not the case, legal actions and tribunals have periodically shed light on instances of <a href="https://www.cnbc.com/2022/03/17/london-insurance-firm-fined-1-million-over-bullying-sexual-harassment.html">bullying and sexual harassment</a> (leading to a more than £1 million fine) and <a href="https://www.ft.com/content/310caee4-d2d9-4f88-9a2b-f6d790b9eb1b">gender discrimination</a> (£2 million payout). There is strong evidence that the City’s historic “laddish” culture <a href="https://www.thetimes.co.uk/article/has-the-city-booted-out-lad-culture-tfc9mqptl">continues to exist</a> in <a href="https://www.standard.co.uk/business/lloyd-s-of-london-culture-drinking-sexism-b988746.html">pockets</a>, and that in some cases this leads to <a href="https://twitter.com/Telegraph/status/1505838573467144193">hostility</a> towards individuals who exist outside established white, male, middle-class norms.</p>
<h2>Why this matters</h2>
<p>Over the past 40 years, inequalities of income and wealth have become more pronounced in the UK. The <a href="https://ifs.org.uk/publications/characteristics-and-incomes-top-1">share of national income</a> taken by the top 1% increased from almost 6% in 1977 to around 14% in 2019. The City’s remuneration practices are implicated here, with the Institute of Fiscal Studies <a href="https://www.theguardian.com/business/2022/may/04/city-london-bonus-boom-risk-driving-up-inequality-institute-fiscal-studies">reporting</a> in 2022 that the City’s pay and bonus packages exacerbate inequality.</p>
<p>The UK’s <a href="https://www.theguardian.com/commentisfree/2023/jan/30/england-old-boys-club-zahawi-wealthy-network">cosy relationship between finance and politics</a> enhances the City’s influence. Bosses and politicians alike claim this is justified because of the City’s <a href="https://www.economicsobservatory.com/how-important-is-the-city-to-the-uk-economy#:%7E:text=Economists%20use%20the%20expression%20because,City%20(Hutton%2C%202022).">major contribution</a> to the UK economy in terms of jobs, tax revenues and trade.</p>
<p>Yet an alternative argument is that the UK’s oversized financial sector impoverishes the UK, resulting from what author Nicholas Shaxson calls the “<a href="https://www.theguardian.com/news/2018/oct/05/the-finance-curse-how-the-outsized-power-of-the-city-of-london-makes-britain-poorer">finance curse</a>”. He cites <a href="https://www.independent.co.uk/news/business/news/finance-curse-uk-economy-sector-city-of-london-loss-financial-services-a8571036.html">research</a> estimating that an oversized City of London inflicted costs of £4.5 trillion on the UK economy between 1995 and 2015. This is explained in part by lost economic output since the 2008 financial crisis, and in part from “<a href="https://eprints.whiterose.ac.uk/143275/1/Baker%20The-UKs-Finance-Curse-Costs-and-Processes%20final.pdf">misallocation costs</a>” as big finance has generated activities that distort the rest of the UK economy – diverting skills, investments and resources from more productive uses.</p>
<p>Shaxson also points to £700 billion of “excess profits” and “excess remuneration” enjoyed by big finance which might otherwise have contributed to the UK economy. He suggests the salaries, bonuses and profits paid out by the City significantly exceed what is necessary to incentivise the supply of financial products and services in an efficient, competitive market.</p>
<p>At the heart of these eye-watering figures are policies first implemented during the 1980s, which privileged the need to maximise shareholder returns over reinvesting profits. This <a href="https://neweconomics.org/uploads/files/NEF_SHAREHOLDER-CAPITALISM_E_latest.pdf">short-term agenda</a> has been associated with rising salaries at the top, growing inequality in UK society, and even increased levels of environmental destruction.</p>
<p>At the same time, financial institutions have been afforded ever-more influence over UK economic policy. Wealthy City donors have <a href="https://www.independent.co.uk/news/uk/politics/tory-funding-donors-money-general-election-lib-dems-labour-a9362571.html">helped fund political parties</a> to ensure policies are prioritised that protect their interests. City leaders have not only shaped laws and regulations in their favour, but also influenced society and culture. This includes promoting a form of “winner takes all” individualism in which the notion of the common good has slowly dissipated.</p>
<p>In the UK, the <a href="https://policy.bristoluniversitypress.co.uk/why-we-cant-afford-the-rich">poorest 10%</a> pay a higher proportion of their income in tax than the richest 10%, while <a href="https://www.nytimes.com/2021/10/11/opinion/pandora-papers-britain-london.html">corporate tax avoidance strategies</a> have additionally limited the redistribution of wealth. In 2015, the Bank of England’s then chief economist, Andy Haldane, <a href="https://twitter.com/BBCNewsnight/status/625081308063121408">warned</a> that under our system, businesses are now “almost eating themselves”. He called on policymakers to consider new models of corporate governance that “share the spoils more equally between a wider set of stakeholders in a firm”, including employees and customers.</p>
<h2>Will the City ever change?</h2>
<p>In 2021, the <a href="https://en.wikipedia.org/wiki/City_of_London_Corporation">City of London Corporation</a> (the City’s formal governing body) set up an <a href="https://www.cityoflondon.gov.uk/supporting-businesses/business-support-and-advice/socio-economic-diversity-taskforce">independent taskforce</a> with a vision of encouraging “equity of progression”, where high performance is valued over “fit” and “polish”. I was a member of this two-year initiative, which culminated in the publication of a <a href="https://www.cityoflondon.gov.uk/assets/Business/breaking-the-class-barrier-december-2022.pdf">five-point pathway</a> to achieve a more socio-economically diverse City of London.</p>
<p>The impact of this taskforce is debatable, but to be fair to its many committed participants, delivering more inclusive and diverse organisations is a “wicked problem” that is difficult, if not impossible, to solve. Not least because not everybody agrees on the nature of the problem – nor even that the problem exists.</p>
<p>Efforts at change have generally been pinned on the “business case” – that once hiring managers are convinced discrimination is irrational, they will feel compelled to act. Yet this is unlikely to work because the incentives are not there. Class-based inequalities embedded within systems and structures offer elite City firms certain benefits, while diversification carries perceived risks.</p>
<p>The business case sometimes suggests diversification will make the City a better or even safer place, by allowing for cognitive difference while preventing “<a href="https://www.cityam.com/businesses-without-diversity-are-plagued-by-groupthink/">groupthink</a>”. But new entrants are generally subjected to strong socialisation processes that train them to present and even think much the same, as management consultant, Diletta, explained to me:</p>
<blockquote>
<p>As much as [firms] talk about diversity, especially now with all this stuff on social class – it’s almost impossible to exist outside the norms … That’s what training is all about. We’re extremely effective at making sure everybody is packaged up and churned out looking and sounding exactly the same. That’s our product. It’s what we sell.</p>
</blockquote>
<p>It seems that in the City, people can be different as long as they are the same. A genuine desire among many City people to deliver fairer outcomes is no match for institutional inertia. When it comes to social class, firms have historically tended to adopt a “deficit” model where young people from working-class backgrounds are assumed to lack the necessary forms of “polish” to get on, and efforts centre on how these deficits can be addressed.</p>
<p>But the challenges they face are not limited to “polish”. Growing up poor in a rich society contributes to long-lasting and sometimes career-limiting feelings of stigma and shame. Abdul explained his feelings as he struggled to access a graduate position in an investment bank:</p>
<blockquote>
<p>I was surrounded by people who were, I suppose you could say, better than me … I didn’t belong.</p>
</blockquote>
<p>An emphasis on social mobility is an attractive agenda for both City leaders and politicians who can present change as a “win-win” – for talented people and the organisations they join. But in practice, this is a zero-sum game: when opportunities are not expanding in absolute terms, for some people to move up others must move down. Current conversations allow City and other elites to avoid such uncomfortable truths.</p>
<p>Instead they focus on more palatable, less threatening questions of culture and behaviour, over the fundamental changes that are needed if the UK’s resources and rewards are to be more fairly distributed. The City of London must recognise its own role in perpetuating – and increasing – economic injustice if ever this status quo is to change.</p>
<p><em>* All interviewees’ names have been changed to protect their anonymity.</em></p>
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<p class="fine-print"><em><span>Research mentioned in this article received funding from government and charitable bodies. However, to protect confidentiality I do not mention which organisations. There is no conflict of interest and individuals took part on the basis of informed consent. I was a working group member for the Corporation of London Taskforce on Socioeconomic Diversity, which is mentioned in this article. I am the author of the recently published book Highly Discriminating: Why The City Isn't Fair and Diversity Doesn't Work. </span></em></p>My research suggests City firms’ efforts to deliver more equal representation at the top have not worked because they were never meant to.Louise Ashley, Senior Lecturer, Queen Mary University of LondonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1912272022-11-18T16:58:52Z2022-11-18T16:58:52ZWhy businesses, banks and society still need more women in executive roles<figure><img src="https://images.theconversation.com/files/494707/original/file-20221110-26-jqhv95.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">shutterstock</span> </figcaption></figure><p>Only nine in the UK’s top 100 companies have a woman CEO, a <a href="https://www.ft.com/content/e05bcfc8-bd8a-4bf5-bd5a-81b3e13fdfa0">recent report</a> has revealed – part of an “appalling” picture of British business which even in 2022 remains remarkably male dominated. The report, from accountancy giant EY and Cranfield University, goes on to reveal that only around 17% of executives in the FTSE 100 are female. </p>
<p>This is despite recent efforts in some areas to improve corporate gender diversity – and a huge amount of research which supports doing so. </p>
<p>Aside from evidence that companies with women CEOs actually <a href="https://www.businessleader.co.uk/research-shows-companies-female-ceo-more-profitable/">make more money</a>, it has been shown, for example, that female directors provide a greater degree of <a href="https://link.springer.com/content/pdf/10.1007/s10551-008-0018-4.pdf">creative thinking</a> and a <a href="https://pubmed.ncbi.nlm.nih.gov/12848221/">more democratic leadership style</a>. </p>
<p>They also have a positive influence on firms’ attitudes to social responsibility. Companies with more women on their boards engage more with <a href="https://link.springer.com/article/10.1007/s10551-012-1272-z">social causes</a> and <a href="https://link.springer.com/article/10.1023/A:1021626024014">charitable actions</a>, and have a more philanthropic <a href="https://link.springer.com/article/10.1007/s10551-012-1589-7">response to natural disasters</a>.</p>
<p>In comparison to men, they show greater sensitivity <a href="https://link.springer.com/article/10.1023/A:1017980520924">towards ethical issues</a>, <a href="https://link.springer.com/article/10.1007/s10551-004-4601-z">demonstrate more ethical behavior</a> and are more likely to <a href="https://www.tandfonline.com/doi/abs/10.1080/08941920.2014.918235">take a pro-environmental view</a>. </p>
<p>As a result, the companies with a greater proportion of female executives and board members have been shown to score higher on <a href="https://onlinelibrary.wiley.com/doi/abs/10.1111/corg.12165">social responsibility performance</a> and <a href="https://link.springer.com/article/10.1007/s10551-020-04522-4">corporate governance</a> and <a href="https://www.sciencedirect.com/science/article/pii/S0929119917301189">public information disclosure</a>. They are also less likely to engage in <a href="https://journals.aom.org/doi/10.5465/amj.2013.0750">corporate fraud</a> and <a href="https://link.springer.com/article/10.1007/s10551-015-2815-x#Sec18">tax avoidance</a>. </p>
<p>Women also make a significant difference when it comes to the efforts of tackling climate change and environmental challenges. For instance, companies with more women board members are found to be more receptive <a href="https://www.sciencedirect.com/science/article/pii/S0929119918301408?casa_token=MrkOzk2LdicAAAAA:C3r25it_PtgCePVM6FoVmq-pjNLW7MSIbf_sxX5ra9uIkQ-6EFXjurQF9c7N_a5zHL_myTUXxWw">to environmental issues</a> and volunteer more information related to <a href="https://link.springer.com/article/10.1007/s10551-015-2759-1">climate change-related risk</a>. Research also shows that companies with more women managers actually <a href="https://www.ecb.europa.eu/pub/pdf/scpwps/ecb.wp2650%7E3b693e6009.en.pdf">have lower CO2 emissions</a>. </p>
<h2>Female accountability</h2>
<p>In the current economic climate, it’s also worth noting that women’s overall positive impact on responsible behaviour can specifically be seen in the banking sector. For example, banks with more women executives are less likely to <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/j.1467-8683.2011.00871.x">take excessive risks</a> and <a href="https://www.sciencedirect.com/science/article/pii/S0929119920302789">commit misconduct</a>, and are <a href="https://www.tandfonline.com/doi/abs/10.1080/1351847X.2020.1801481">more transparent</a> in their financial reporting. </p>
<p>This is important to anyone with a bank account. Banks were held responsible as the main culprits of the global financial crisis of 2008, because of their <a href="https://www.aeaweb.org/articles?id=10.1257/aer.99.2.606">reckless-risk taking and careless lending</a>, which affected livelihoods across the world.</p>
<p>In the aftermath, UK regulators identified banks’ poor corporate governance practices as a reason for the irresponsible behaviour and asked for greater diversity in boardrooms. The economic turmoil caused by COVID provided the first opportunity since 2008 to test whether women managers make a difference in times of crisis. </p>
<p>During the pandemic banks played a crucial role in supporting the economy. And <a href="https://www.sciencedirect.com/science/article/pii/S0929119922000566">new research</a> shows that banks with women directors provided more support for their customers and communities. Those banks were also <a href="https://www.sciencedirect.com/science/article/pii/S0929119920300043">less likely</a> to have been bailed out by taxpayers after the global financial crisis. </p>
<p>Banks now appear to have improved their commitment to responsible behaviour, as shown by the growing membership of voluntary schemes such as the one run by the <a href="https://www.unepfi.org/banking/bankingprinciples/">United Nations</a>, which has been signed by 300 of the largest banks – representing almost half of the global banking industry. </p>
<p>They have also increased diversity and female presence in boardrooms. In the UK, women now make up 38% of boards in the five largest commercial banks (HSBC, Barclays, Lloyds, NatWest and Santander). Many European countries are <a href="https://www.ft.com/content/a64d91dd-b434-4b58-bfd6-9f804501cb9d">also doing better</a> than before. </p>
<h2>Power and responsibility</h2>
<p>But there is much progress to be made. In the US, the proportion of women in leadership roles within financial services firms is <a href="https://www2.deloitte.com/us/en/insights/industry/financial-services/women-in-the-finance-industry.html">only 24%</a>, and there are only <a href="https://www2.deloitte.com/us/en/insights/industry/financial-services/women-in-the-finance-industry.html">six women CEOs</a> among the 107 largest public financial institutions. </p>
<p>Across the 300 largest American and European banks, <a href="https://www.sciencedirect.com/science/article/pii/S0929119922000566">research</a> shows that in only 0.3% of banks do women make up more than 50% of the board.</p>
<figure class="align-center ">
<img alt="London skyline." src="https://images.theconversation.com/files/494863/original/file-20221111-24-dyu4yc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/494863/original/file-20221111-24-dyu4yc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=378&fit=crop&dpr=1 600w, https://images.theconversation.com/files/494863/original/file-20221111-24-dyu4yc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=378&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/494863/original/file-20221111-24-dyu4yc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=378&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/494863/original/file-20221111-24-dyu4yc.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=474&fit=crop&dpr=1 754w, https://images.theconversation.com/files/494863/original/file-20221111-24-dyu4yc.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=474&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/494863/original/file-20221111-24-dyu4yc.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=474&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Glass ceilings.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-england-bank-district-central-famous-377534515">Shutterstock/ZGPhotography</a></span>
</figcaption>
</figure>
<p>In the UK, none of the top five banks has a female chairperson. Only NatWest has a <a href="https://www.natwestgroup.com/who-we-are/board-and-governance/group-board/alison-rose.html">female CEO</a>, after it appointed Alison Rose to the top job in 2019, making her the first woman to lead a major UK bank. </p>
<p>It is surely time for another bank to do the same. Female leadership matters in banking because banks are a powerful force at the centre of the economy. When they are run well they can have a significant influence on business activity and support economic growth.</p>
<p>Banks can use this power to distribute funds in a responsible way, tackling climate change and reducing global inequalities. It is a role which requires ethical, compassionate and responsible leadership – and according to the evidence, more women.</p><img src="https://counter.theconversation.com/content/191227/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Alper Kara does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Female managers and board members have a positive effect on company performance and the environment.Alper Kara, Professor and Head of Department - Accounting, Finance and Economics, University of HuddersfieldLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1927092022-11-09T10:40:10Z2022-11-09T10:40:10ZStrikes: why soaring CEO pay could help explain UK’s recent industrial action<figure><img src="https://images.theconversation.com/files/492322/original/file-20221028-61541-8q7gv4.jpg?ixlib=rb-1.1.0&rect=0%2C2%2C1000%2C663&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Lower earners are counting the cost of a growing wage gap.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/compare-wage-gap-tax-differences-equal-1997565632">Andrey_Popov / Shutterstock</a></span></figcaption></figure><p>The pay gap in UK business is eye-watering. Bosses of the largest UK companies earn <a href="https://www.financialfairness.org.uk/en/media-centre/media-centre-news-article/pay-ratios-2022#:%7E:text=Across%20the%2069%20companies%20that,2021%2C%20at%2034%3A1.">around 100 times more</a> than the lowest-paid employees in their organisations, according to some estimates. This year, chief executives from the top 100 UK companies saw their pay rise by nearly a quarter on average, <a href="https://www.pwc.co.uk/press-room/press-releases/executive-pay-at-ftse-100-firms-recovers-to-pre-pandemic-levels.html">research from PwC</a> shows. This is at a time when many employees are being offered <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/employmentandemployeetypes/bulletins/averageweeklyearningsingreatbritain/october2022#:%7E:text=The%20rate%20of%20annual%20pay,outside%20of%20the%20pandemic%20period.">below-inflation pay rises</a>.</p>
<p>The sense of unfairness about this among workers is intensifying. We have seen this during the “<a href="https://speakerpolitics.co.uk/strikes-set-to-continue-as-unions-meet-at-tuc-congress/">summer of strikes</a>” this year, which has continued into the colder months and does not look likely to let up <a href="https://www.theguardian.com/uk-news/2022/nov/05/nurses-across-uk-vote-to-strike-in-first-ever-national-action">any time soon</a>.</p>
<p>The average gross salary in the UK at the moment is £38,131 for a full-time role, according to data from the <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/annualsurveyofhoursandearnings/latest">Office for National Statistics</a>. Not bad, you might think. But this figure obscures the dramatic variations in pay among UK workers in different industries and at various company levels. Indeed, the UK has <a href="https://commonslibrary.parliament.uk/research-briefings/cbp-7484/#:%7E:text=International%20comparisons,than%20in%20the%20United%20States.">a higher level of income inequality</a> than many other developed countries.</p>
<p>The size of the pay gap varies with firm size. For the largest UK companies, such as those listed in the FTSE 100, the median CEO-to-employee pay ratio in 2020/21 was 67:1, while CEOs earned <a href="https://www.financialfairness.org.uk/en/media-centre/media-centre-news-article/pay-ratios-2022#:%7E:text=Across%20the%2069%20companies%20that,2021%2C%20at%2034%3A1.">93 times more</a> than employees on the lowest levels of pay.</p>
<h2>A growing gap</h2>
<p>As stark as these ratios are, they might actually understate the magnitude of pay inequality. </p>
<p>First, the figures above fail to account for low-paid workers such as contractors or staff on zero hour contracts. A recent <a href="https://www.financialfairness.org.uk/docs?editionId=1ed52299-9fee-4245-b20f-ac2b47c87bce">High Pay Centre</a> analysis of 69 company reports in the first quarter of 2022 calculates that a CEO at the average UK company earns 117 times more than their lowest-paid employees when these so-called “indirectly employed” workers are taken into account.</p>
<p>Second, the above analysis reveals that median CEO to employee pay ratios almost doubled from 34:1 to 63:1 between 2021 and 2022. This indicates a significant pandemic rebound in top-level pay is widening the gap further. But even before the pandemic, the gap was widening, if at a slower pace. During the ten-year period to the end of the 2021 financial year, median incomes for the poorest fifth of the UK population have <a href="https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householddisposableincomeandinequality/financialyearending2021#:%7E:text=Median%20household%20disposable%20income%20in,(ONS)%20Household%20Finances%20Survey">stayed broadly the same</a>, versus a 9.1% increase in average pay for the richest fifth of the population.</p>
<p>Interestingly, the size of the gap is not constant across the spectrum of wages (or the income distribution) paid to people in the UK. It is wider towards the top, which means a very small fraction of individuals are earning a disproportionately large fraction of total pay in the UK.</p>
<p><strong>Annual UK full-time gross pay by occupation, April 2022</strong></p>
<iframe height="603px" width="100%" src="https://www.ons.gov.uk/visualisations/dvc2189/beeswarm/index.html"></iframe>
<h2>Why is the pay gap so wide?</h2>
<p>There are a number of reasons why we see such large and persistent differences in pay within UK companies, particularly at this upper end. First, an <a href="https://www.jstor.org/stable/1830810#metadata_info_tab_contents">economic theory</a> called tournament models argues that “winner-takes-all” pay arrangements – where CEO pay exceeds all other employees (including the next highest paid executive) by a large multiple – create the strongest incentives for leaders. This is the same principle used to justify offering massive lottery jackpots rather than multiple smaller wins.</p>
<p>Second, variable pay structures such as bonuses and options linked to company share prices, are more common for company executives. Established <a href="https://www.sciencedirect.com/science/article/pii/0165410185900266">corporate governance</a> codes <a href="https://www.frc.org.uk/getattachment/88bd8c45-50ea-4841-95b0-d2f4f48069a2/2018-uk-corporate-governance-code-final.pdf">recommend</a> that salaries with large variable elements – typically, a low salary paired with a large performance-related component such as a bonus – incentivise performance. </p>
<p>But this means executives bear additional pay risk (that they may not make much of a bonus one year), and so are compensated for that with higher expected pay when performance conditions are met. In other words, when pay is directly linked to performance via a bonus, your level of remuneration will typically be higher.</p>
<p>Other factors could reinforce disproportionately high pay for senior executives, such as weak (too easy) performance conditions in executive pay contracts. Also, the labour market for executive talent tends to be more competitive than for other employees because it draws on a smaller talent pool. Pay is driven up when companies have to compete harder to attract potential candidates. </p>
<p>These competitive effects are magnified because consultants tend to advise that CEOs must receive above-median pay to be competitive, which leads to <a href="https://www.jstor.org/stable/4166216#metadata_info_tab_contents">pay ratcheting</a>. The <a href="https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/bulletins/genderpaygapintheuk/2022">gender pay gap</a> may also play a role: men consistently earn more than women (even when holding roles constant) and men are disproportionately <a href="https://www.bbc.com/worklife/article/20220222-proof-verus-potential-problem">more likely</a> to hold senior executive positions.</p>
<figure class="align-center ">
<img alt="A cardboard sign held up at a strike says: " src="https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=412&fit=crop&dpr=1 600w, https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=412&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=412&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=518&fit=crop&dpr=1 754w, https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=518&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/492319/original/file-20221028-44561-ostww3.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=518&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Workers in many UK industries have been striking for pay rises recently.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-29th-july-2020-nhs-1787843108">John Gomez / Shutterstock</a></span>
</figcaption>
</figure>
<p>It is often said that sunlight is the best disinfectant. And with this in mind, UK companies with more than 250 employees have been subject to rules on pay ratio reporting <a href="https://www.gov.uk/government/news/new-executive-pay-transparency-measures-come-into-force#:%7E:text=Pay%20ratio%20regulations%20will%20apply,relate%20to%20wider%20employee%20pay.">since January 2019</a>. This means that pay inequity is now more visible and so the debate should now be more informed. </p>
<p>But a potential consequence of a more informed debate is more conflict with employees. In the prevailing economic climate this could fuel pressure for strikes. But it’s hard to argue that keeping the scale of pay inequity in the shadows to reduce strike pressure is a better alternative. Increased conflict (in the form of debate) is almost certainly a necessary step on road to change.</p><img src="https://counter.theconversation.com/content/192709/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Steven Young receives or has previously received funding from the Economic & Social Research Council, Finance Reporting Council, Financial Conduct Authority, CFA Society UK, Pensions & Lifetime Savings Association, Institute of Chartered Accountants in England & Wales, The Leverhulme Trust, The European Commission, and RailPen. </span></em></p>The pay gap is growing in UK, which has seen increased strike activity this year.Steven Young, Professor of Accounting, Lancaster UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1911882022-10-13T16:43:30Z2022-10-13T16:43:30ZEnergy crisis: how to help small businesses survive and become more sustainable<figure><img src="https://images.theconversation.com/files/489379/original/file-20221012-22-u6tzkg.jpg?ixlib=rb-1.1.0&rect=27%2C9%2C5979%2C3998&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://unsplash.com/photos/-THiqda3iGM">adam winger / Unsplash</a></span></figcaption></figure><p>The number of companies in <a href="https://www.theguardian.com/business/2022/oct/07/company-insolvencies-hit-13-year-high-in-england-and-wales">financial distress</a> has spiked in parts of the UK to the <a href="https://www.ons.gov.uk/businessindustryandtrade/changestobusiness/bankruptcyinsolvency/articles/risingbusinessinsolvenciesandhighenergyprices/2022-10-07">highest level</a> since the 2007-8 global financial crisis laid waste to the global economy. The latest government figures show that in August more than one in ten UK businesses reported a moderate-to-severe risk of insolvency (being unable to pay the bills). Nearly a quarter of these companies say energy prices are their main concern.</p>
<p>Average annual energy bills can start at <a href="https://www.tylbynatwest.com/card-machines/no-time-to-waste">£3,000</a>, rising to as much as £5,000 for small businesses in some parts of the UK. And more companies – particularly smaller organisations – are becoming worried about the impact of energy costs on business growth.</p>
<p><strong>Energy cost concerns</strong></p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="Line chart showing percentage of responding businesses perceiving energy prices as the main concern, UK (March to October 2022)." src="https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=347&fit=crop&dpr=1 600w, https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=347&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=347&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=436&fit=crop&dpr=1 754w, https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=436&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/489147/original/file-20221011-21-4aw4s7.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=436&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Businesses – particularly smaller firms – polled by the government between February and October 2022 cited rising concerns about energy prices.</span>
<span class="attribution"><a class="source" href="https://www.ons.gov.uk/businessindustryandtrade/changestobusiness/bankruptcyinsolvency/articles/risingbusinessinsolvenciesandhighenergyprices/2022-10-07">Office for National Statistics – Business Insights and Conditions Survey</a></span>
</figcaption>
</figure>
<p>In this <a href="https://www.ft.com/content/8463707c-239a-4944-8d68-058a63e7898d">environment</a>, around 53% of the UK’s small and medium sized enterprises (SMEs or private firms with less than 250 employees) are expected to collapse or reduce their activities, according to <a href="https://www.fsb.org.uk/resources-page/out-in-the-cold.html">the Federation of Small Business</a>.</p>
<p>To address the very real threat of rising energy costs, in September the UK government introduced its <a href="https://www.gov.uk/government/news/government-outlines-plans-to-help-cut-energy-bills-for-businesses">energy bill relief scheme</a> for non-household consumers, including SMEs. For the next six months, the scheme will support businesses whose current gas and electricity prices have increased significantly because of the recent rise in the <a href="https://www.consilium.europa.eu/en/infographics/energy-prices-2021/#:%7E:text=The%20rise%2C%20linked%20to%20the,have%20had%20an%20aggravating%20effect.">global energy prices</a>.</p>
<p>But the scheme might not be enough to help all companies with their energy costs, especially since it will only run for six months initially. Further, it could damage efforts to transition to a more sustainable economy.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/energy-price-freezes-and-business-support-are-sticking-plasters-heres-how-to-protect-uk-families-and-companies-from-future-crises-189406">Energy price freezes and business support are sticking plasters – here's how to protect UK families and companies from future crises</a>
</strong>
</em>
</p>
<hr>
<p>SMEs comprise 99% of the country’s business environment and generate around 60% of its commercial waste as well as more than 43% of its <a href="https://doi.org/10.1016/j.jclepro.2020.123770%20%20%20https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/290998/scho0209bpjq-e-e.pdf">industrial pollution</a>. As such, responsible behaviour by these businesses towards the environment is crucial. </p>
<p>But recent <a href="https://productivityinsightsnetwork.co.uk/app/uploads/2020/10/PIN-DRAFT-FINAL-Report-30-09-2020-RO-TH-1.pdf">research</a> shows the UK government’s green finance policy will mostly benefit large infrastructure projects. This includes the <a href="https://www.local.gov.uk/about/news/cop26-green-economy-could-see-nearly-700000-green-jobs-created-2030">new low carbon sector jobs</a> touted during COP 26 in Glasgow last year and the government’s plan to create a green industrial revolution by boosting offshore wind capacity, <a href="https://www.gov.uk/government/publications/the-ten-point-plan-for-a-green-industrial-revolution/title">among other initiatives</a>.</p>
<p>Given their prevalence on the UK business scene, efforts to maintain the growth of the SMEs must happen alongside support for sustainable green business models to meet government net zero targets. And this must form part of any discussion of the current energy crisis.</p>
<p>Our research into <a href="https://bura.brunel.ac.uk/bitstream/2438/24212/1/FullText.pdf">business recovery</a> following the COVID-19 pandemic showed that relatively small steps can form part of a recovery model for smaller businesses during difficult times for the economy. Based on this research, here are three ways to protect smaller businesses in the current economic downturn.</p>
<h2>1. Consumers: shop local</h2>
<p>Local businesses – on and offline – benefit from our support, as do their surrounding communities. The local economy retains <a href="https://www.theguardian.com/money/2013/dec/06/shop-locally-small-business-saturday-seven-reasons">63p out of every £1</a> spent with an SME, compared to 40p from larger businesses. </p>
<p>Those bigger firms can also reduce their carbon footprint and logistics challenges by sourcing from nearby small companies. The higher revenues generated from this extra business could be used by SMEs to invest in green energy sources to meet their sustainability goals.</p>
<figure class="align-center ">
<img alt="Chalkboard outside a shop that says " src="https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/489155/original/file-20221011-21-msq3n7.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Shop local to support smaller businesses in the community.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/shop-local-saturday-support-your-weirdos-1186603168">Suzanne Tucker / Shutterstock</a></span>
</figcaption>
</figure>
<h2>2. Other businesses: timely payments</h2>
<p>Late payments can have a big impact on a company’s finances, especially when you consider that <a href="https://www.fsb.org.uk/resource-report/chain-reaction-improving-the-supply-chain-experience-for-small-firms.html">77% of SMEs</a> are part of the supply chain of bigger businesses. However, even with the existence of a <a href="https://www.gov.uk/government/news/government-tackles-late-payments-to-small-firms-to-protect-jobs">prompt payment code</a> designed to stop invoicing delays, £23.4 billion of late payments were owed to firms at the start of this year. </p>
<p>The UK’s <a href="https://www.gov.uk/government/news/liz-barclay-named-as-small-business-commissioner-to-lead-crackdown-on-late-payments-to-small-businesses">small business commissioner</a> must be empowered to require timely payments to help smaller businesses survive. The government is currently reviewing the results of a <a href="https://www.gov.uk/government/consultations/increasing-the-scope-and-powers-of-the-small-business-commissioner">consultation</a> on this issue. This will ensure SMEs are financially secure enough to invest in their own businesses, for example by switching to green energy sources.</p>
<h2>3. Government: incentives and support</h2>
<p>Many SMEs use <a href="https://es.catapult.org.uk/news/new-study-finds-85-of-commercial-rented-buildings-face-climate-crunch-due-to-sme-challenge/">rented premises</a>. So, reducing the use of fossil fuels for heating and power means convincing landlords to install renewable energy sources such as solar panels, as well as smart meters and other green technology. More government incentives for landlords could ensure they work with SMEs to secure greener, cheaper and more sustainable energy sources. </p>
<p>And for SMEs that do own premises, the government could introduce green incentives via commercial property tax reductions. A government taskforce could also assist SMEs in reducing and managing fossil fuel consumption, as well as explaining things like how a VAT-registered firm can reclaim energy costs under such a scheme.</p>
<figure class="align-center ">
<img alt="Green traffic light." src="https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/489158/original/file-20221011-23-b5e9j9.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A traffic light system could help direct small business support to where it’s most needed.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/green-traffic-light-arrow-city-while-1774407317">Shotmedia / Shutterstock</a></span>
</figcaption>
</figure>
<p>Any support from government should also be tailored. Using a single initiative to support all SMEs assumes every company is experiencing the energy crisis in the same way. A traffic light system could help to flag the most vulnerable companies. These “red light” firms would get more short-term government support to survive the energy crisis than those in the amber or green groups, for example.</p>
<p>Energy suppliers could also use the traffic light system to modify their business models to support SMEs. For example, suppliers could maintain contracts with red light companies that fail to pay bills if they know the government has promised additional financial support for these businesses. Suppliers could even consider cutting upfront charges for such companies.</p>
<p>This kind of business recovery model will help smaller firms to not only survive the energy crisis, but also to transition to greener sources of heating and electricity, creating more sustainable growth models across this vital sector.</p><img src="https://counter.theconversation.com/content/191188/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Three ways to support smaller businesses in the current economic downturn.Monomita Nandy, Reader in Accounting and Finance; Director of Internationalisation, Brunel University LondonSuman Lodh, Senior Lecturer in Finance, Middlesex UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1894062022-08-30T14:52:29Z2022-08-30T14:52:29ZEnergy price freezes and business support are sticking plasters – here’s how to protect UK families and companies from future crises<figure><img src="https://images.theconversation.com/files/481762/original/file-20220830-18781-2at5m9.jpg?ixlib=rb-1.1.0&rect=0%2C23%2C7789%2C5161&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Businesses also face higher costs this winter.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/serious-young-bakery-owners-sitting-small-1761104399">Dragon Images / Shutterstock</a></span></figcaption></figure><p>The UK is bracing itself for a dark winter following the recent announcement of an <a href="https://www.independent.co.uk/news/uk/home-news/martin-lewis-energy-bills-ofgem-b2153183.html">80% increase</a> in the government’s energy price cap from October 1 2022. This will raise the annual bill for an average UK household to £3,549. The cap is expected to go up again by up to 50% in January 2023, and some forecasters even fear bills could almost top <a href="https://inews.co.uk/news/energy-price-cap-average-uk-bill-forecast-7700-april-2023-1819925?ico=most_popular">£8,000 by the end of that year</a>.</p>
<p>The energy price cap does not apply to businesses or public sector organisations such as schools and the NHS, however. There is no limit to what these organisations can be charged for their energy use. As heavy users of energy, exorbitant energy costs threaten their <a href="https://www.independent.co.uk/news/education/education-news/school-energy-costs-pay-increase-shorter-week-b2145109.html">daily operations</a>. </p>
<p>Concerns over energy supply have also raised the very real prospect of <a href="https://www.bloomberg.com/news/articles/2022-08-09/uk-braces-for-blackouts-gas-cuts-in-january-in-emergency-plan">power cuts and blackouts</a> this winter. Manufacturers and small businesses (who <a href="https://www.gov.uk/government/statistics/business-population-estimates-2021/business-population-estimates-for-the-uk-and-regions-2021-statistical-release-html#:%7E:text=Nonetheless%2C%20SMEs%20account%20for%20three,%C2%A32.3%20trillion%20(52%25)">employ around three-fifths</a> of the UK workforce) are especially vulnerable and thousands are already reported to have <a href="https://www.thisismoney.co.uk/money/news/article-11138015/Small-firms-closing-crushed-big-energy-bills.html">closed down</a>. </p>
<p>What’s more, some energy companies are now <a href="https://www.theguardian.com/business/2022/aug/25/big-energy-firms-refuse-to-supply-small-uk-businesses-bankruptcy-fears-contracts">refusing to supply</a> small businesses or asking for large upfront payments, out of fear these companies will be unable to pay their energy bills. If these refusals start to occur on a wider scale, we should expect some supply chain disruption as companies literally struggle to keep the lights on. </p>
<p>The crisis is also acute in the hospitality sector, which is already finding it difficult to <a href="https://www.ft.com/content/027ea2e9-d6c3-4a18-a735-87f92ace95a4">hire workers</a> due to post-Brexit immigration rules. Pub owners have <a href="https://www.theguardian.com/business/2022/aug/30/thousands-of-uk-pubs-face-closure-without-energy-bills-support">issued warnings</a> about potential closures across the sector. Even the traditional British chip shop is <a href="https://www.bbc.co.uk/news/uk-england-somerset-62650572">under threat</a> – several have already closed in recent months due to the high costs of cooking oils and energy. </p>
<p>The prospect of business closures and shutdowns threatens to raise unemployment and exacerbate the <a href="https://www.bbc.co.uk/news/business-62405037">expected recession</a>. But the government has arguably failed to offer any <a href="https://www.theguardian.com/politics/2022/aug/26/liz-truss-tories-disarray-energy-crisis-urged-spell-out-plans-help">adequate solutions</a>. </p>
<p>The <a href="https://www.britishchambers.org.uk/news/2022/08/government-is-running-out-of-time-to-support-businesses-in-urgent-need">British Chambers of Commerce</a> has written to government leaders with a five-point action plan to help business through the crisis. This includes calls for a COVID-style emergency energy grant for small- and medium-sized enterprises (SMEs), as well as stronger regulation of the energy market. </p>
<p>Opposition parties have also put forward proposals to tackle the crisis. Both <a href="https://www.afzalkhan.org.uk/news/2022/08/23/labours-plan-for-energy-costs-for-business/">Labour</a> and the <a href="https://www.theguardian.com/politics/2022/aug/08/ed-davey-calls-for-energy-furlough-scheme-to-avoid-october-price-cap-rise">Liberal Democrats</a> have called for a six-month price freeze on bills. </p>
<p>Labour have also suggested a £1 billion contingency fund to support energy intensive industries like steel, chemicals and ceramics, as well as business rate cuts for SMEs. Alongside a price freeze, the Green Party have called for <a href="https://www.theguardian.com/politics/2022/aug/17/green-party-calls-for-nationalisation-of-big-five-energy-firms">renationalisation</a> of the big five energy firms at a cost of around £2.5 billion. </p>
<p>There is some merit in these proposals although, in truth, they are largely sticking plasters. The UK <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/1086781/Energy_Trends_June_2022.pdf">imports around 60% of gas</a> for household and business energy use and so prices are determined on global wholesale markets. </p>
<h2>What’s gone wrong?</h2>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/481778/original/file-20220830-6748-z8b9ue.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/481778/original/file-20220830-6748-z8b9ue.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/481778/original/file-20220830-6748-z8b9ue.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=344&fit=crop&dpr=1 600w, https://images.theconversation.com/files/481778/original/file-20220830-6748-z8b9ue.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=344&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/481778/original/file-20220830-6748-z8b9ue.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=344&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/481778/original/file-20220830-6748-z8b9ue.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=432&fit=crop&dpr=1 754w, https://images.theconversation.com/files/481778/original/file-20220830-6748-z8b9ue.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=432&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/481778/original/file-20220830-6748-z8b9ue.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=432&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">The price of gas on the wholesale market in GB for delivery in Winter 2022.</span>
<span class="attribution"><a class="source" href="https://www.catalyst-commercial.co.uk/wholesale-gas-prices/">Catalyst Digital Energy</a></span>
</figcaption>
</figure>
<p>This energy crisis sheds light on the UK’s vulnerability and lack of energy security. Privatisation in the 1980s and 1990s led to a highly fragmented energy market and an over-reliance on short-term markets and imported oil and gas. Poor <a href="https://www.mirror.co.uk/news/politics/liz-truss-facing-questions-over-27774728">policy choices</a> over the last decade have left the UK with some of the <a href="https://www.theguardian.com/business/2021/sep/24/how-uk-energy-policies-have-left-britain-exposed-to-winter-gas-price-hikes">lowest energy storage capacity</a> in Europe. </p>
<p>Scrapping the <a href="https://www.theguardian.com/environment/2015/jul/10/uk-scraps-zero-carbon-home-target">zero-carbon homes plan</a>, reducing <a href="https://www.theguardian.com/environment/2019/jun/05/home-solar-panel-installations-fall-by-94-as-subsidies-cut">incentives and subsidies</a> for solar power and onshore wind, and more than a <a href="https://www.thetimes.co.uk/article/a-decade-of-energy-failures-fz35xxplw">decade of inaction</a> on home insulation now means the <a href="https://neweconomics.org/2020/07/a-national-house-retrofitting-programme">UK wastes more household energy</a> than any other country in western Europe. Lower energy efficiency puts greater pressure on the National Grid and raises energy costs for both business and households. </p>
<h2>Long-term solutions</h2>
<p>There are no easy or quick solutions to this energy crisis. External energy shocks mean that countries become poorer and governments must decide how to best to distribute the pain among different groups. </p>
<p>A co-ordinated and strategic package of policy support is now required. In the short term, most economists would agree that it makes sense to target financial support on <a href="https://www.theguardian.com/money/2022/aug/25/economists-urgent-action-energy-bills-winter-policies-price-freezes-taxes-cost-of-living-crisis?pc=dailybrief">poorer households</a>, while also providing some assistance to businesses to safeguard the economy. </p>
<p>But this crisis is also an opportunity to rethink the UK’s long-term energy needs and to build resilience. In particular, the UK needs to get serious about a “<a href="https://neweconomics.org/about/our-missions/green-new-deal">Green New Deal</a>” that weans both consumers and businesses off (imported) fossil fuels, and instead focuses on developing more renewable energy sources and reducing energy waste. </p>
<p>For households, this means more subsidies for better home insulation. This is something <a href="https://www.euronews.com/green/2021/10/25/italy-pays-homeowners-110-of-costs-to-eco-proof-their-homes">Italy has done </a>. It would cut <a href="https://lordslibrary.parliament.uk/home-insulation-and-the-net-zero-target/">carbon emissions</a> and deliver long-term savings. </p>
<p>For business, <a href="https://www.tandfonline.com/doi/full/10.1080/14693062.2021.1957665">industrial policy</a> can also play a critical role, providing funding for research into new industrial processes that reduce waste and improve energy efficiency. Some <a href="https://www.digitalrefining.com/article/1002769/digital-twins-heat-up-the-capabilities-of-energy-storage-plants#.YwoGm9PMKUk">industries</a> are already taking this step by experimenting with new digital technologies such as <a href="https://www.sciencedirect.com/science/article/pii/S136403212200315X">“digital twins”</a>– simulations to help companies to better anticipate and optimise their energy use. </p>
<p>If successful, such energy efficiencies could be applied across a range of sectors, including aerospace, automotive and medical technologies. This is a welcome first step in terms of rethinking our long-term energy needs to ensure UK businesses and consumers avoid future energy crises.</p><img src="https://counter.theconversation.com/content/189406/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Phil Tomlinson currently receives funding from the Engineering and Physical Sciences Research Council (EPSRC) for the Made Smarter Innovation: Centre for People-Led Digitalisation.</span></em></p><p class="fine-print"><em><span>David Bailey receives funding from the Economic and Social Research Council’s UK in a Changing Europe programme.</span></em></p>UK businesses are also suffering from the rising cost of living and doing business.Phil Tomlinson, Professor of Industrial Strategy, Deputy Director Centre for Governance, Regulation and Industrial Strategy (CGR&IS), University of BathDavid Bailey, Professor of Business Economics, University of BirminghamLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1889262022-08-19T11:34:16Z2022-08-19T11:34:16ZUK strikes: how industrial action at a major port could disrupt supplies of clothing, cars and canned food<p>The ability to move products from A to B has been affected by COVID and Brexit-related bottlenecks in recent years, as well as rising concerns about the environmental impact of how companies supply our goods. The <a href="https://theconversation.com/the-big-challenges-for-supply-chains-in-2022-174420">unpredictability of global markets</a> has continued to affect logistics in 2022. In addition to increased <a href="https://www.clarksons.com/home/news-and-insights/2022/2022-shippings-half-year-report/#:%7E:text=congestion%20globally%20remains-,elevated,-%2C%20with%20the%20total">congestion</a> at ports around the world, Russia’s invasion of Ukraine has created “the most significant disruption to geo-political "norms” for decades", says global shipping firm <a href="https://www.clarksons.com/home/news-and-insights/2022/russia-ukraine-shipping-context/">Clarksons</a>.</p>
<p>Supply chain issues have added to the <a href="https://www.instituteforgovernment.org.uk/explainers/cost-living-crisis">cost of living crisis</a> in the UK this year by making it more <a href="https://news.sky.com/story/cost-of-living-crisis-why-have-food-prices-gone-up-so-much-in-a-month-12675121">difficult and expensive</a> to transport products like food around the world. But another new challenge to supply chain capabilities has recently emerged in the form of the <a href="https://www.bbc.co.uk/news/business-62134314">industrial action</a> spreading across various UK industries. Transport, <a href="https://www.networkrail.co.uk/industrial-action/">rail in particular</a>, has been the focus of strike activity in recent months, with attention mostly on the disruption faced by passengers. Freight transportation has also been impacted, however, not least because large parts of the UK’s transport infrastructure are shared by passenger and freight systems.</p>
<p>Freight transportation and logistics workers at the UK port of Felixstowe recently announced plans for eight days of <a href="https://www.theguardian.com/uk-news/2022/aug/09/strikes-due-at-felixstowe-port-after-pay-talks-end-without-agreement?CMP=Share_iOSApp_Other">industrial action</a>. Nearly 2,000 workers are due to start striking on August 21 in a pay dispute that recently saw them <a href="https://www.theguardian.com/uk-news/2022/aug/05/felixstowe-dockers-plan-eight-day-strike-in-pay-dispute">reject</a> a 7% pay rise and £500 bonus from Felixstowe Dock and Railway Company. </p>
<p>The strike could cause further congestion in UK supply chains. Felixstowe is the largest container port in the UK, handling more than 40% of the country’s shipping containers. Some of the world’s largest ships serve the port, which processes more than 4 million 20 foot-long containers annually from some 2,000 ships. </p>
<p>Around 11 billion tons of goods are <a href="https://www.ics-shipping.org/shipping-fact/shipping-and-world-trade-driving-prosperity/#:%7E:text=Some%2011%20billion%20tons%20of,ultimately%20consumed%20underpins%20modern%20life.">shipped globally</a> each year, amounting to about 1.5 tons per person. Products transported using container ships range from cars to clothing, toys and tinned food. Whether bought online or in shops and supermarkets, these items reach us through a complex network of companies called the supply chain. Key supply chain business processes include purchasing and procurement, manufacturing, warehousing and transportation. </p>
<p>The transportation process is a particularly critical link in global supply chains. It aims to move material efficiently, effectively and sustainably. Weakness anywhere in this network impacts overall supply chain capability and performance, compromising suppliers’ ability to <a href="https://www.emerald.com/insight/content/doi/10.1108/SCM-07-2014-0249/full/html">reliably meet</a> customer requirements. These issues not only affect how and when we can get goods, but also what we pay for them and the <a href="https://www.sciencedirect.com/science/article/abs/pii/S0272696303000639">success</a> of the companies involved in supplying the products we buy.</p>
<p>Any disruption at Felixstowe, therefore, will cause delays when moving goods in and out of the UK. The risks to businesses as a result vary from sector to sector, but would potentially include disruption to the supply of certain products and increased <a href="https://www.researchgate.net/publication/283974913_Cost_Consequences_of_a_Port-Related_Supply_Chain_Disruption">supply chain costs</a>. </p>
<p>The impact of this weakness would multiply significantly when the thousands of supply chains that Felixstowe supports to bring goods into and out of the country are considered. For example, the port is a critical link for the UK’s <a href="https://www.automotivelogistics.media/ports-and-processors/strike-action-at-felixstowe-threatens-uk-automotive-supply-chain/43307.article">automotive sector</a>. UK car makers are already under pressure from global supply chain weakness. In particular, research shows Brexit has affected the industry’s <a href="http://eprints.bournemouth.ac.uk/34919/">ability to compete</a> with other markets in terms of car exports.</p>
<figure class="align-center ">
<img alt="A crane loading shipping containers, lorry." src="https://images.theconversation.com/files/479893/original/file-20220818-349-6z0s89.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/479893/original/file-20220818-349-6z0s89.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=401&fit=crop&dpr=1 600w, https://images.theconversation.com/files/479893/original/file-20220818-349-6z0s89.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=401&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/479893/original/file-20220818-349-6z0s89.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=401&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/479893/original/file-20220818-349-6z0s89.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/479893/original/file-20220818-349-6z0s89.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/479893/original/file-20220818-349-6z0s89.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A crane unloading shipping containers.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/business-logistics-concept-map-global-partner-447486787">Travel mania / Shutterstock</a></span>
</figcaption>
</figure>
<h2>Global network</h2>
<p>The UK is also unlikely to be the only region affected by industrial action. There have been recent reports of <a href="https://www.supplychainbrain.com/articles/35373-worlds-key-workers-threaten-to-hit-economy-where-it-will-hurt">strikes by key workers</a> at other critical supply chain facilities globally. This is part of a longer-term trend towards industrial action that <a href="https://theconversation.com/modern-capitalism-has-opened-a-major-new-front-for-strike-action-logistics-89616">could impact</a> business models and structures throughout the global supply chain.</p>
<p>Looking at the broader picture, UK companies in all sectors will continue to grapple with a range of significant supply chain challenges this year. And with a looming recession, the UK’s political and business leaders need to develop solutions that will support economic recovery and growth. The Confederation of British Industry (CBI) is <a href="https://www.cbi.org.uk/our-campaigns/tackling-supply-chain-challenges-to-drive-economic-recovery/">calling for</a> improved communication between government and businesses to address supply chain issues, as well as more training and an agile migration system to address short-term labour shortages.</p>
<p>The supply chain industry must become stronger to ensure consumer demand is satisfied in an affordable and sustainable way. Indeed, one of the biggest single issues facing industry, but particularly the freight transportation and logistics sector is <a href="https://www.hw.ac.uk/ebs/research/logistics-sustainability.htm">decarbonisation</a>. This long-term problem requires more attention, alongside the new issues that are arising as a result of industrial action, in order to ensure the world’s supply networks remain open for business.</p><img src="https://counter.theconversation.com/content/188926/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Edward Sweeney does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Scheduled strikes by UK port workers will add to the challenges plaguing the UK supply chain.Edward Sweeney, Professor of Logistics and Supply Chain Management, Heriot-Watt UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1822522022-06-08T15:40:11Z2022-06-08T15:40:11ZWhat struggling businesses can do to weather the economic storm<figure><img src="https://images.theconversation.com/files/467716/original/file-20220608-15-mi8ofs.jpg?ixlib=rb-1.1.0&rect=61%2C36%2C4016%2C2090&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/small-business-entrepreneur-female-opening-store-1952118334">Shutterstock/ReeldealHD</a></span></figcaption></figure><p>Rather than rebounding in 2022, economic conditions in the UK have deteriorated. <a href="https://www.imf.org/en/Publications/WEO/Issues/2022/04/19/world-economic-outlook-april-2022%5D">Forecasts</a> for growth in 2022 and the year after have been cut dramatically. </p>
<p>The reasons for this are well documented. Take your pick from soaring energy costs, supply chain disruptions, the impact of COVID-19 and post Brexit difficulties. All of these have led to rising uncertainty. And nor is the UK unique; all G7 economies have had their <a href="https://www.oecd-ilibrary.org/sites/62d0ca31-en/index.html?itemId=/content/publication/62d0ca31-en">growth forecasts cut</a>. </p>
<p>Such a strained economic environment is challenging for everyone. But prospects for small and medium sized enterprises (SMEs) are particularly bleak. </p>
<p>These are the builders, florists, design companies, coffee shops and countless other businesses which provide vital employment, services and tax revenue to the places where we live. There were 5.5 million SMEs in the UK at the <a href="https://www.fsb.org.uk/uk-small-business-statistics.html">start of 2021</a> accounting for 99.9% of all businesses, 60% of UK employment, and around 50% of private sector turnover. </p>
<p>A <a href="https://www.begbies-traynorgroup.com/news/business-health-statistics/critical-corporate-financial-distress-levels-jump-as-cocktail-of-threats-start-to-take-their-toll">recent report</a> suggests the number of businesses in “critical financial distress” is up by 19% in the first quarter of 2022 compared to 2021. Construction (up 51%) and hospitality (up 42%) are the two sectors struggling the most. </p>
<p>Government <a href="https://www.gov.uk/government/statistics/company-insolvency-statistics-january-to-march-2022/commentary-company-insolvency-statistics-january-to-march-2022">data</a> backs this up. Company insolvencies in England and Wales are up 112% for the first three months of 2022.</p>
<p>SMEs as a rule tend to be particularly vulnerable to economic pressures. Typically they do not have large cash reserves and find it difficult and expensive to raise new capital. They also have limited options when it comes to weathering a financial storm. </p>
<p>One obvious and common response is to raise revenue by selling assets and making staff redundant. But <a href="https://www.springerprofessional.de/en/sme-insolvency-bankruptcy-and-survival-an-examination-of-retrenc/17539654">our research</a> challenges this conventional wisdom, and suggests they are not the best route to a business’s survival. </p>
<p>When it comes to selling off assets, the most attractive ones are the most likely to find buyers. A breakdown service, for example, may have no problem selling off its newest recovery truck for a quick cash boost. But holding on to that truck is likely to be key to the business’s long-term survival. </p>
<p>Likewise, we found that cutting labour costs, either by reducing wages or the number of employees is likely to potentially improve cashflow in the short run, but be damaging to morale and reduce the staff expertise required to build recovery in the long term. </p>
<p>A restaurant which lays off its head chef may make an immediate saving on its wage bill, but will also be left without leadership in a critical area when the business environment improves. They may also find that chef difficult to replace if the labour market subsequently becomes more competitive. </p>
<h2>Bespoke approach</h2>
<p>So what does work? We found that the most positive step a business can take to ensure its survival is to reduce debts – not by quickly raising emergency cash, but through careful management. There is wisdom in the “automatic stay” approach, common in many <a href="https://www.uscourts.gov/services-forms/bankruptcy/bankruptcy-basics/chapter-11-bankruptcy-basics#:%7E:text=A%20case%20filed%20under%20chapter,court%20approval%2C%20borrow%20new%20money.">insolvency procedures</a>, where a business is granted a period of grace during which their dept payments are paused. </p>
<p>Ultimately, this also benefits the business’s creditors who are more likely to be paid (albeit later than planned) if the business survives than if it fails.</p>
<p>This approach is supported by some in the UK business community, including one insolvency specialist which has <a href="https://bmmagazine.co.uk/news/number-of-firms-in-critical-financial-distress-rises-sharply/">urged the government</a> to extend COVID loan repayment schedules to ease pressure. The Federation of Small Businesses meanwhile, is <a href="https://www.fsb.org.uk/campaign/recovery-ready.html">advising SMEs</a> on steps they can take to deal with problematic debt, which might involve the business owner seeking external expertise – before a court appointed insolvency practitioner becomes involved. </p>
<p>But knowing what to do and what not to do is only part of successful recovery from impending insolvency. The way you do it is also important. </p>
<figure class="align-center ">
<img alt="Car ready to be loaded onto a breakdown lorry." src="https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/467719/original/file-20220608-302-fs4cf2.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Avoid a business breakdown.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/loading-broken-car-on-tow-truck-275048402">Shutterstock/Nejron Photo</a></span>
</figcaption>
</figure>
<p><a href="https://www.tandfonline.com/doi/abs/10.1080/08985626.2013.870236?journalCode=tepn20">Research suggests</a> that SMEs facing temporary financial distress are better advised by “turnaround” business experts rather than those who specialise in insolvency. Turning a situation around before insolvency occurs requires broader expertise and involves a <a href="https://www.cbi.org.uk/articles/saving-shareholder-value-by-avoiding-insolvency/">sophisticated approach</a> to saving the businesses we all rely on in our day-to-day lives. </p>
<p>It means there is business potential in seeking outside assistance to create a bespoke recovery plan, which takes individual circumstances into account, and carefully designing operational improvements that reduce costs and improve liquidity that don’t endanger a business’ core activity. Businesses should also exploit opportunities to increase revenue and maintain close contact with creditors. </p>
<p>These kinds of timely and specific actions are more likely to gain the support of creditors, employees and customers, on which successful recovery hinges. </p>
<p>SMEs are a vital engine of the economy. But they are also fragile by nature. Financial and tactical support are what many facing temporary difficulties will need – for their sake, and the sake of a much needed wider economic recovery.</p><img src="https://counter.theconversation.com/content/182252/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Naresh R. Pandit does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Selling assets and shedding staff is not the a recipe for survival.Naresh R. Pandit, Professor of International Business, University of East AngliaLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1774892022-03-18T13:25:10Z2022-03-18T13:25:10ZCOVID bailouts helped politically connected businesses more than others – new research<figure><img src="https://images.theconversation.com/files/452450/original/file-20220316-27-166ru1y.jpg?ixlib=rb-1.1.0&rect=0%2C117%2C6016%2C3872&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-illustration/pound-coin-united-kingdom-funding-grant-1844230189">Shutterstock/steved_np3</a></span></figcaption></figure><p>COVID has been a painfully expensive ordeal for countries across the world. Aside from the medical cost of vaccines, testing and treatment, economic aid for furlough schemes and sector bailouts dealt a serious blow to public finances.</p>
<p>Nations responded by distributing vast sums of money which are unlikely to be recouped. The UK alone <a href="https://www.ft.com/content/0bd2d141-68ea-4d6b-aa81-9300a7ab27b9">spent £261 billion</a> across different relief schemes, of which <a href="https://metro.co.uk/2022/02/23/at-least-15bn-of-public-money-lost-or-risked-by-government-failings-16153623/">£15 billion</a> is expected to be lost due to fraud and errors. </p>
<p>While the government can make a compelling case for the huge sums spent over the course of the pandemic so far, it is worth taking a closer look at where some of the money has gone. </p>
<p><a href="https://journals.sagepub.com/doi/full/10.1177/0308518X211072545">Our research</a> reveals that when it came to financial assistance by the government, some businesses were more likely than others to receive it. These included firms with political connections, and those owned by large and influential shareholders. </p>
<p>We discovered this by looking at a sample of publicly listed UK firms and examining their political connections using a variety of databases. We found that companies with powerful majority shareholders or with political links (a politician member of the board, for example), had a higher likelihood of being bailed out. This suggests that some firms were able to leverage their political capital to gain a competitive advantage. </p>
<p>For its part, the government needed to ensure that recipients of public funds used them for their intended purposes such as continuing to pay suppliers, employees and lenders. This was admittedly a difficult task given all the demands thrown up by the pandemic. </p>
<p>But the fact that so much will be written off in fraudulent claims or other kinds of losses shows a lack of due diligence and monitoring. Our research suggests a further element of crony capitalism whereby public funds were directed towards private interests. </p>
<p>One recent accusation of cronyism was levelled at <a href="https://theconversation.com/david-cameron-and-greensill-this-toothless-regulator-is-absurdly-easy-to-sidestep-158914">Greensill Capital</a>, the bankrupt finance company which received access to government emergency COVID loans. Greensill paid the former UK prime minister, David Cameron, a salary of more than $1 million (£767,000) a year for a <a href="https://www.ft.com/content/536867f4-2dd3-42a1-9b29-54ed92693635">part-time board role</a>. Cameron said he was not motivated by personal gain, but because he thought the company “had a really good idea for how to help extend credit to thousands of businesses”.</p>
<p>Our research also found that bailouts were often given to firms with high amounts of debt and low cash reserves – businesses which potentially may have gone bust without government support. </p>
<p>After accepting tax payer funds presumably given to help them survive, some then went on to pay generous dividends to their shareholders and <a href="https://www.msn.com/en-gb/money/other/german-chemicals-giant-basf-pays-directors-and-staff-bonus-worth-%E2%82%AC360m-after-borrowing-%C2%A31bn-from-bank-of-england/ar-BB1e4Uii">bonuses to their directors</a>. </p>
<figure class="align-center ">
<img alt="An evening view of UK parliament buildings." src="https://images.theconversation.com/files/452461/original/file-20220316-21-1j8p5ox.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/452461/original/file-20220316-21-1j8p5ox.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=396&fit=crop&dpr=1 600w, https://images.theconversation.com/files/452461/original/file-20220316-21-1j8p5ox.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=396&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/452461/original/file-20220316-21-1j8p5ox.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=396&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/452461/original/file-20220316-21-1j8p5ox.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=497&fit=crop&dpr=1 754w, https://images.theconversation.com/files/452461/original/file-20220316-21-1j8p5ox.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=497&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/452461/original/file-20220316-21-1j8p5ox.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=497&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Even greater economic power.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/westminster-palace-big-ben-clocktower-by-1192264885">Shutterstock/Sven Hansche</a></span>
</figcaption>
</figure>
<p>Elsewhere, some companies belonging to large international corporate groups benefited from a publicly funded opportunity to get cheap, short-term loans, while their contribution or commitment to the UK economy was questionable. For instance, BASF, a German chemical group, received the biggest single payout (£1 billion), but has now <a href="https://www.ft.com/content/e9eed60f-4002-4cad-b679-dbd241b2b019">closed its UK plant</a> and is moving the work to France. BASF has said it will be repaying the loan. </p>
<h2>Power to the politicians</h2>
<p>The pandemic then, saw the UK government, like others, take on a far more proactive role in financing the business world. It provided vast funds, paid salaries, and spent a fortune trying to fill economic holes. </p>
<p>This form of capitalism, known as “state capitalism”, involves governments assuming the role of an “<a href="https://www.sciencedirect.com/science/article/pii/S1090951620300882">active economic agent</a>”. It drastically expands the state’s role as promoter, supervisor and owner of capital, with far greater control over the economy.</p>
<p>Other forms of capitalism, characterised by market supremacy and lighter regulation, or a greater input from business, have, for the moment at least, been pushed aside. </p>
<p>As a result, the UK, the fifth largest economy in the world, has a <a href="https://commonslibrary.parliament.uk/research-briefings/sn06167/">budget deficit</a> rising to its highest ever peacetime level: £323 billion, or 15% of GDP. The pandemic has made the UK’s version of state capitalism far more visible and extensive – bringing far greater economic power (and responsibility) to the people who run the government.</p><img src="https://counter.theconversation.com/content/177489/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Anna Grosman does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Who got what and why.Anna Grosman, Associate Professor in Innovation and Entrepreneurship, Loughborough UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1757522022-01-27T13:18:12Z2022-01-27T13:18:12ZUnilever: why the maker of Marmite is feeling the squeeze<figure><img src="https://images.theconversation.com/files/442941/original/file-20220127-7386-1yphteo.jpg?ixlib=rb-1.1.0&rect=95%2C58%2C4734%2C3188&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Different tastes.</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/leeds-united-kingdom-april-22nd-2015-271713677">Shutterstock/abimages</a></span></figcaption></figure><p>As a major manufacturer of well known cleaning products, it is perhaps fitting that events at Unilever have started to resemble something of a corporate soap opera. In the last few weeks there has been increased pressure at the top, a failed merger attempt, backlash from investors, and an announcement of major job cuts. </p>
<p>Prior to all of this, the British company’s share price has made little progress over the <a href="https://www.google.com/search?q=unilever+share+price&rlz=1C1CHBF_en-GBGB754GB754&oq=unilever+share+price&aqs=chrome..69i57j0i512l9.9479j1j15&sourceid=chrome&ie=UTF-8">last five years</a>. </p>
<p>The embattled chief executive, Alan Jope, responded in late 2021 with a failed <a href="https://www.bbc.co.uk/news/business-60053927">£50 billion bid</a> for the consumer division of the pharmaceutical giant Glaxo Smith Kline (GSK), where brands include Panadol and Sensodyne toothpaste. This was followed by a New York hedge fund acquiring what was thought to be <a href="https://www.nasdaq.com/articles/trian-fund-management-reportedly-acquires-stake-in-unilever">a significant holding</a> (and influence) at Unilever on January 24 2022. </p>
<p>The next day Unilever, which makes Marmite, Hellman’s mayonnaise and Dove soap, announced that <a href="https://www.standard.co.uk/business/unilever-job-cuts-1500-managers-alan-jope-nelson-peltz-gsk-b978605.html">1,500 managerial roles would go</a> (the company employs 150,000 people across the world) as part of a cost cutting exercise. Jope too, may soon be fighting for his job. </p>
<p>His predecessor, Paul Polman, was always going to be a difficult act to follow. In the role for ten years up to 2019, he was one of the few business leaders to successfully pursue a sustainability strategy while keeping his major shareholders happy. Towards the end of his reign however, growth and share performance <a href="https://csimarket.com/stocks/growthrates.php?code=UL">began to falter</a>, and Jope was chosen to take over. But three years on, the storm clouds are gathering. </p>
<p>Since Jope was appointed, Unilever’s share price had fallen by <a href="https://www.google.com/search?q=unilever+share+price&rlz=1C1CHBF_en-GBGB754GB754&oq=unilever+share+price&aqs=chrome..69i57j0i512l9.9479j1j15&sourceid=chrome&ie=UTF-8">almost a third</a> from £52 to £36, while growth has declined to <a href="https://csimarket.com/stocks/growthrates.php?code=UL">around 2% each year</a>. Such mediocre performance has led to shareholders <a href="https://vnexplorer.net/?#investor-denounces-sustainability-obsession-unilever-nieuws-nl-ew20224084241.html">criticising the management</a> for allegedly “obsessing” about sustainability while, they claim, neglecting share performance and growth. </p>
<p>This no doubt led to the attempt of a significant acquisition of higher growth products, with multiple bids for GSK’s healthcare business. After an <a href="https://www.afr.com/companies/manufacturing/unilever-faces-mounting-investor-backlash-over-bid-for-gsk-unit-20220118-p59p7c">investor backlash</a>, Jope has said he will not increase the bid any further.</p>
<p>The reluctance of investors is perhaps understandable. Many will have considered the £50 billion figure to be too high and been wary of acquiring large amounts of debt and seeing a subsequent drop in the company’s credit rating. On announcement of the bids, Unilever’s shares <a href="https://www.google.com/search?q=unilever+share+price+uk&rlz=1C1CHBF_en-GBGB754GB754&oq=unilever+share+&aqs=chrome.2.69i59j69i57j0i512l4j69i60l2.7503j1j7&sourceid=chrome&ie=UTF-8">fell 11%</a> while those of GSK <a href="https://www.google.com/search?q=gsk+share+price+uk&rlz=1C1CHBF_en-GBGB754GB754&oq=gsk+share+price&aqs=chrome.1.69i57j0i67j0i512l6j0i67j0i512.6609j1j7&sourceid=chrome&ie=UTF-8">increased 5%</a>. In effect, the market concluded in the short term that there would be a significant transfer of value from Unilever to GSK if the merger were to go ahead at that price.</p>
<h2>Power to the shareholders</h2>
<p>Large acquisitions rarely live up to expectations. Surprisingly robust <a href="https://hbr.org/2016/06/ma-the-one-thing-you-need-to-get-right">research findings</a>, substantiated by a large number of projects <a href="https://hbr.org/2011/03/the-big-idea-the-new-ma-playbook">show</a> that around 60% destroy value of the target business, while half are sold off again within five years. This effect also appears to endure over time. Firms often either overpay, follow the wrong strategy, destroy value during integration phase, or suffer a combinations of these problems.</p>
<figure class="align-center ">
<img alt="Several bottle of Dove branded soap." src="https://images.theconversation.com/files/442946/original/file-20220127-18-1t9rh22.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/442946/original/file-20220127-18-1t9rh22.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=301&fit=crop&dpr=1 600w, https://images.theconversation.com/files/442946/original/file-20220127-18-1t9rh22.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=301&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/442946/original/file-20220127-18-1t9rh22.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=301&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/442946/original/file-20220127-18-1t9rh22.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=379&fit=crop&dpr=1 754w, https://images.theconversation.com/files/442946/original/file-20220127-18-1t9rh22.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=379&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/442946/original/file-20220127-18-1t9rh22.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=379&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Cleaning up.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/poznan-pol-jul-4-2019-dove-1444555028">Shutterstock/monticello</a></span>
</figcaption>
</figure>
<p>Mergers and acquisitions are complex and difficult, and few companies get them right. To many shareholders Unilever looked like it would be no exception. One fund manager, Terry Smith, inspected the data used by Unilever to justify the deal and <a href="https://www.cityam.com/terry-smith-rounds-again-on-unilever-and-labels-failed-gsk-bids-a-near-death-experience/">concluded</a> that the available savings fell well short of what would have been needed to justify the sizeable cost. His view was that in having its bid refused, Unilever had “avoided a near death experience”.</p>
<p>Ultimately Jope has made his own position difficult, verging on impossible.
If he had persisted further, he would have annoyed his shareholders immensely. By withdrawing, he will be criticised for not having a strategy and appearing to allow low growth to continue. </p>
<p>Now he will have to deal with demands expected to be made by the US based activist shareholder Nelson Peltz, owner of the hedge fund which has taken a position at Unilever. It is <a href="https://www.standard.co.uk/business/unilever-nelson-peltz-trian-partners-bernstein-barclays-jpmorgan-b978393.html">widely expected</a> that he will push for major changes, which could include a new CEO and for parts of Unilever to be sold (such as food businesses including Ben and Jerry’s), as well as cost reductions and redundancies. For the man currently in charge of Dove soap and Persil detergent, things could be about to get very messy indeed.</p><img src="https://counter.theconversation.com/content/175752/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>John Colley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Big mergers are hugely complex, and not always popular with shareholders.John Colley, Professor of Practice, Associate Dean, Warwick Business School, University of WarwickLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1650312021-07-26T16:23:39Z2021-07-26T16:23:39ZPingdemic staff shortages: how business can cope with isolating employees<figure><img src="https://images.theconversation.com/files/413134/original/file-20210726-28-1jnv4rq.jpg?ixlib=rb-1.1.0&rect=0%2C55%2C4045%2C2670&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/portrait-worker-uniform-medical-mask-on-1873784455">STEKLO/Shutterstock</a></span></figcaption></figure><p>Despite the lifting of most legal COVID-19 restrictions on July 19, the pandemic’s effect on the health, economy and wellbeing of the English public is far from over. The latest development is in the form of the “pingdemic” –- the term referring to the hundreds of thousands of people who have been instructed to self-isolate in recent weeks via the NHS COVID-19 track and trace app. </p>
<p>The so-called pingdemic has had a massively disruptive effect on businesses, who are suffering from widespread <a href="https://www.independent.co.uk/news/uk/politics/train-services-reduced-pingdemic-isolation-b1889260.html">staff shortages</a> across sectors. Another casualty is the food supply chain. We are <a href="https://www.theguardian.com/world/2021/jul/23/england-facing-weeks-of-pingdemic-disruption-to-services-and-food-supply">missing items</a> on our supermarket shelves as a result of shortages of workers both because of the pingdemic and <a href="https://news.google.com/articles/CAIiEPCsQ6g1YFfFQyPzKbJ-7_4qFwgEKg4IACoGCAowl6p7MN-zCTClss0G?hl=en-GB&gl=GB&ceid=GB%3Aen">Brexit complications</a>. </p>
<p>Meanwhile, there are concerns that people may be <a href="https://www.ft.com/content/29fb3ec9-f90d-46fc-9bc6-99e733f6cf18">deleting or disabling</a> the app, posing a threat to the attempts to control the spread of COVID variants. Business leaders, <a href="https://news.sky.com/story/pmqs-boris-johnson-apologises-to-businesses-over-pingdemic-after-more-than-half-a-million-told-to-isolate-12360492">confused by</a> conflicting government guidance, are now caught between the need to protect their employees’ health and safety, and to avoid the financial impact of closures after many months of lost income.</p>
<p>The government has attempted to combat this through an emergency plan to exempt NHS staff and some key workers, such as in the food supply industry, from isolating if they are pinged, so long as they take daily COVID tests and are fully vaccinated. But food bosses say they have not been properly briefed on what they think is a <a href="https://www.theguardian.com/world/2021/jul/24/food-bosses-say-ministers-are-making-englands-covid-pingdemic-supply-chaos-worse">bureaucratic process</a> to exempt workers.</p>
<p>The app, despite its various flaws, is doing what it is designed to do -– businesses cannot ignore requirements to self-isolate, but must be flexible in how they handle employees who have been pinged.</p>
<p>Of course, as has been highlighted throughout the pandemic, there is a vast gap between jobs that can and cannot be done remotely. While no solution will be one-size-fits-all, there are a few things that businesses affected by isolating workers can do to mitigate the disruption and ensure the safety of both their employees and their business success.</p>
<h2>How can businesses respond?</h2>
<p>Now that we are hopefully on the way out of the depths of the pandemic, the pingdemic calls for businesses to persevere and innovate. This means that in the short term, they may need to rotate employees into different roles, as well as change existing ways of working.</p>
<p>Employers should make workplace changes to reduce the likelihood of contact with others and being pinged – whether this means returning to early-COVID days of social distancing, reduced opening hours, or more people working from home. </p>
<p>If they have not done so already, businesses who can afford to should set up isolation funds, independent of the government’s <a href="https://www.gov.uk/government/publications/test-and-trace-support-payment-scheme-claiming-financial-support/claiming-financial-support-under-the-test-and-trace-support-payment-scheme">support payments</a> for low-income individuals, to ensure that workers experience no financial impact from being asked to isolate. If a job cannot be done from home, employers could use the opportunity to invest in remote training or development for workers who are healthy but have been asked to isolate.</p>
<p>For sectors like social care and construction, partnerships with employment agencies could temporarily increase their pool of workers and provide a “safety net” of employees.</p>
<p>Businesses in sectors like retail and hospitality may have to initially operate under reduced hours. But looking to the longer term, they could learn to cope with staff shortages in different ways. For example, a warehouse operative may rotate to an administrative position while they are in isolation, or help to train agency workers remotely, or work on their own development and training.</p>
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<img alt="Photo of a mobile phone screen showing the NHS track and trace app scanning location" src="https://images.theconversation.com/files/413135/original/file-20210726-15-180e88x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/413135/original/file-20210726-15-180e88x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/413135/original/file-20210726-15-180e88x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/413135/original/file-20210726-15-180e88x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/413135/original/file-20210726-15-180e88x.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/413135/original/file-20210726-15-180e88x.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/413135/original/file-20210726-15-180e88x.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">The NHS contact tracing app is the source of the so-called ‘pingdemic’.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-uk-august-2020-nhs-covid19-1804521058">Esther Barry/Shutterstock</a></span>
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<p>HGV drivers are currently in high demand due to staff shortages in their industry. This has led to a <a href="https://www.bbc.co.uk/news/business-57753277">potentially dangerous</a> situation where some are driving for too many hours. Government plans to improve working conditions and recruit more drivers have <a href="https://www.theguardian.com/uk-news/2021/jul/24/lorry-drivers-plan-to-strike-over-low-pay-and-poor-working-conditions">not been received well</a>, and industry groups are calling for longer-term proposals to combat the shortage, including better pay and <a href="https://www.smmt.co.uk/2021/07/what-can-be-done-to-tackle-the-uks-truck-driver-shortage/">new recruitment techniques</a>.</p>
<p>Business leaders, like all citizens, have a moral responsibility to protect others and prevent further pressure on the NHS. They should respond in a way which protects their employees, and gives them adequate financial protection and flexibility to self-isolate, as well as making workplace changes to reduce the likelihood of being pinged. </p>
<p>Finally, as much as the pingdemic is a concern, it may also be a distraction from wider sociopolitical issues like Brexit, an ageing population, inflation and increasingly also youth unemployment – not to mention the continuing health threat of COVID-19.</p><img src="https://counter.theconversation.com/content/165031/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>As hundreds of thousands of people are “pinged” by the NHS track and trace app, how can employers cope with staff shortages?Emily Yarrow, Senior Lecturer in International Human Resource Management, University of PortsmouthJulie Davies, Reader in Leadership & Development, Manchester Metropolitan UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1555202021-02-25T13:50:52Z2021-02-25T13:50:52ZHow universities can support local businesses and communities<figure><img src="https://images.theconversation.com/files/386205/original/file-20210224-21-1gj8qc3.jpg?ixlib=rb-1.1.0&rect=257%2C18%2C5690%2C1592&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/business-people-analyzing-statistics-financial-concept-377884705">Rawpixel.com/Shutterstock</a></span></figcaption></figure><p>The pandemic has provided an urgent lesson in the value of cooperation and partnership. The state, the private sector and voluntary groups all rely on the success of the others to prosper.</p>
<p>Collaboration will be more important than ever as we begin to focus on recovery over the coming years. This will be crucial, in particular, when it comes to helping local areas most affected by economic disruption and loss of jobs. The question is where the impetus for this collaboration will come from, in what form and when.</p>
<p>This is where the UK’s network of universities should have a natural role. They have contacts across government, business, voluntary sectors and their local communities. They can provide the leadership and motivation to keep different groups talking, learning from each other and working together for a broad common purpose.</p>
<h2>Nurturing growth</h2>
<p>Bradford is a classic example of a metropolitan district where there are stark inequalities in terms of wealth, health and opportunities between <a href="https://www.theguardian.com/cities/2018/feb/05/life-britain-youngest-city-bradford-uk-unemployment">different parts of the city</a>. It is a de-industrialised city that has been left behind in terms of investment into transport infrastructure and new industrial development, and has been <a href="https://www.bradford.gov.uk/business/help-for-businesses/bradford-district-covid-19-economic-impact-business-survey/">hit hard</a> by COVID-19 and the emerging aftermath. </p>
<p>At the same time, Bradford is the UK’s youngest city, with the highest proportion of <a href="https://www.bradford.gov.uk/business/bradford-economy/about-bradfords-economy/">under 16s</a>. It is also one of the most ethnically diverse, with a strong foundation of family-run firms and a strong entrepreneurial spirit. However, for all the potential of a city like Bradford, start-ups remain fragile and in need of nurturing to support development, sustained growth and prosperity.</p>
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<img alt="Aerial view of dense city buildings" src="https://images.theconversation.com/files/386220/original/file-20210224-13-1dz1i4q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/386220/original/file-20210224-13-1dz1i4q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=393&fit=crop&dpr=1 600w, https://images.theconversation.com/files/386220/original/file-20210224-13-1dz1i4q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=393&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/386220/original/file-20210224-13-1dz1i4q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=393&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/386220/original/file-20210224-13-1dz1i4q.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=494&fit=crop&dpr=1 754w, https://images.theconversation.com/files/386220/original/file-20210224-13-1dz1i4q.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=494&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/386220/original/file-20210224-13-1dz1i4q.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=494&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Bradford city centre.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/aerial-view-bradford-city-centre-yorkshire-323899625">Neil Mitchell/Shutterstock</a></span>
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<p>The University of Bradford has been in contact with 10,000 regional small and medium-sized businesses about their experiences since last summer, finding out more about the local environment <a href="https://www.bradford.ac.uk/news/archive/2020/sme-survey-will-give-voice-to-businesses-hit-by-covid-19.php">for doing business</a>. </p>
<p>Carrying out research like this is one way the university is taking a central role in helping the city recover and move forward. What’s more, the initial findings have aided in the work and strategic planning of the Bradford Economic Recovery Board, which I chair on behalf of <a href="https://www.bradford.gov.uk/browse-all-news/press-releases/economic-recovery-plan/">Bradford District Council</a>. The board was set up to stress test the district’s economic strategy and develop a new plan to help businesses grow, retrain unemployed people and attract investment in infrastructure and talent.</p>
<p>Universities are impartial and apolitical, which makes them ideal for leading this kind of community partnership initiative. They are already, or should be, at the heart of regional networks and able to build and extend partnerships on behalf of communities. For example, the University of Bradford’s networks led to the chair of Tesco plc, the chair of Yorkshire Building Society and the chief executive of a major charity becoming involved with the Bradford Economic Recovery Board. </p>
<h2>Community links</h2>
<p>Universities are major employers and cultural centres. The contact points between universities and their local regions are greater in number and breadth – and arguably also in importance – than any other kind of organisation. That means they have a store of understanding of local character and needs, as well as the ability to coordinate local development opportunities and initiatives.</p>
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<img alt="Young woman in university library" src="https://images.theconversation.com/files/386209/original/file-20210224-21-1y07259.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/386209/original/file-20210224-21-1y07259.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/386209/original/file-20210224-21-1y07259.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/386209/original/file-20210224-21-1y07259.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/386209/original/file-20210224-21-1y07259.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/386209/original/file-20210224-21-1y07259.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/386209/original/file-20210224-21-1y07259.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Universities have a wealth of resources to help local communities.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/female-student-taking-notes-book-library-516640027">Jacob Lund/Shutterstock</a></span>
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<p>Across the UK, universities have found ways to help businesses and communities with recovery. Robert Gordon University in Aberdeen has offered 400 funded short course places to help people strengthen their business offerings and <a href="https://www.rgu.ac.uk/news/news-2020/3053-rgu-launches-free-short-courses-in-response-to-the-economic-impact-of-covid-19">develop new skills</a>. </p>
<p>Kingston University has set up a new partnership with the local chamber of commerce to help local businesses <a href="https://www.kingston.ac.uk/research/coronavirus/">overcome their challenges</a>. The Open University provides free access to <a href="http://www.open.ac.uk/business/apprenticeships/blog/free-learning-for-work">950 short courses</a>. At the University of Reading, locals are being given slots with staff to discuss how the university could better support <a href="http://www.reading.ac.uk/about/working-with-the-community/cuppa-over-community.aspx">enterprise and community groups</a>. </p>
<p>A number of universities have opened up their facilities to the NHS to help fast-track the training of <a href="https://www.universitiesuk.ac.uk/covid19/supporting-national-effort/Documents/we-are-together-case-studies-covid-19.pdf">new recruits</a>. Many have volunteering services where students are matched up with the needs of local community organisations for help with IT and digitisation of services, or provide group project opportunities to work on real, <a href="https://www.universitiesuk.ac.uk/covid19/supporting-national-effort/Documents/we-are-together-case-studies-covid-19.pdf">business saving ideas</a>. </p>
<p>Universities will only become accepted as having a genuine regional role when communities have seen and felt the results of initiatives like this. That means commitment to delivery over the long term, and taking responsibility for outcomes together with other partners in local government and business.</p><img src="https://counter.theconversation.com/content/155520/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Zahir Irani does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Universities can provide the leadership and motivation to keep different groups learning from each other and working together.Zahir Irani, Professor of Management and Deputy Vice-Chancellor, University of BradfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1462342020-12-03T08:42:07Z2020-12-03T08:42:07Z‘The asylum process broke my dream … now I have a new one.’ The refugee entrepreneurs<figure><img src="https://images.theconversation.com/files/369604/original/file-20201116-19-uwus0a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Members of Anqa - a marketplace led by refugee business founders.</span> <span class="attribution"><a class="source" href="https://www.anqacollective.org/">Frederic Aranda/https://fredericaranda.com</a>, <span class="license">Author provided</span></span></figcaption></figure><p>“This was never my plan. I love my country”. I was sat with Thomas (not his real name) in a bustling community centre where he volunteers with fellow refugees and asylum seekers. Thomas, in his 40s, is a tall, athletic man. He was directing newcomers towards the lunch station, smiling and answering questions. He offered me a plate and then told me with some pride about one of his defining experiences which happened in 2012. “I had the honour of representing my country in the Olympic Games,” he says, smiling.</p>
<p>Thomas, it turns out, was a Judo master, competing at the highest level and training others. Well respected among the Judo community, his prominence also brought unwanted attention, leading to his flight from his homeland in Africa in 2013. Even now, it is important for his safety that his anonymity is protected.</p>
<p>Sadly, Thomas’ story is far from unique. As the world struggles amid pandemic uncertainty there may be no other group better suited at finding ways to cope than refugees. Restrictions on movement, working and property ownership inhibit the freedom of refugees globally, pushing many into poverty. Yet against this oppressive backdrop refugees show tremendous ingenuity, creating businesses and livelihoods from whatever is available to them.</p>
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<img alt="" src="https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=600&fit=crop&dpr=1 600w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=600&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=600&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=754&fit=crop&dpr=1 754w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=754&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/288776/original/file-20190820-170910-8bv1s7.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=754&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><strong><em>This article is part of Conversation Insights</em></strong>
<br><em>The Insights team generates <a href="https://theconversation.com/uk/topics/insights-series-71218">long-form journalism</a> derived from interdisciplinary research. The team is working with academics from different backgrounds who have been engaged in projects aimed at tackling societal and scientific challenges.</em> </p>
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<p><a href="https://www.sciencedirect.com/science/article/abs/pii/S0883902619301168?via%3Dihub">Research shows</a> that refugee businesses provide <a href="https://publications.aston.ac.uk/id/eprint/37736/1/Diversity_and_migrant_enterprise.pdf">opportunities</a> for those who find that the doors to employment are <a href="https://core.ac.uk/reader/151397420">closed to them</a> – even if they are well qualified for the jobs they apply for. In camps and resettled communities, refugee businesses become hubs providing vital information, support and resources that fellow refugees would struggle to access any other way.</p>
<p>For example, in Kakuma, Kenya’s largest refugee camp, <a href="https://www.inkomoko.com/">a refugee business</a> is the only <a href="https://reliefweb.int/report/kenya/soap-maker-kenya-refugee-camp-lowers-prices-fight-covid-19">source of soap</a> – a vital necessity during a global pandemic. Similarly, in <a href="https://www.eastbelfast.org/">east Belfast</a>, a Syrian bakery provides the daily bread eaten by many Syrian families that was previously unavailable in the local area.</p>
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<p>Many of the prerequisites thought essential for starting a business are unavailable to refugees. Unable to access finance, geographically distant from their social networks and sometimes culturally dislocated, there is a tremendous leap required for refugees with start-up ambitions. <a href="https://centreforentrepreneurs.org/networks/refugee-entrepreneurship-network/summit/">Initiatives</a> have emerged to support “refugee entrepreneurship” in locations as diverse as London, Germany, France, Netherlands, Rwanda, Iran, Australia, Canada and Japan. </p>
<p>Many of these initiatives began as grassroots support efforts and have grown to meet the demand for business support from refugees. More recently, philanthropic donors and <a href="https://www.gov.uk/government/news/new-business-start-up-training-for-refugees-in-the-uk">government departments</a> have funded <a href="https://www.ssi.org.au/services/ignite">pilot schemes</a> to establish how best to understand the impact of refugee <a href="https://issbc.org/our-services/ignite">business support</a>. </p>
<p>As a <a href="https://www.lboro.ac.uk/departments/sbe/news/2020/dr-michelle-richey-professor-m-n-ravishankar-and-colleagues-awarded-grant.html">research lead</a> for the <a href="https://centreforentrepreneurs.org/">Centre for Entrepreneurs</a> (the organisation running a UK-wide Home Office backed pilot scheme) I have encountered a number of these initiatives and met a diverse array of refugee businessmen and women first hand. I have gathered their stories together for a paper which is under review. The people I interviewed were all inspirational in their own way and their accounts were deeply moving. They are stories of hardship and suffering. But, ultimately, they are about survival and hope. </p>
<h2>Olympian turned IT technician</h2>
<p>Which brings me back to Thomas. “The asylum process broke my dream,” he says, remembering his six years in limbo, awaiting a refugee status decision and the right to remain in UK. He was not allowed to work during that time and lived on £35 a week. He sighs: “It was a very difficult time.” But, determined to do “whatever he could to survive”, Thomas looked for opportunities to stay active and socially engaged.</p>
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Read more:
<a href="https://theconversation.com/the-way-we-use-data-is-a-life-or-death-matter-from-the-refugee-crisis-to-covid-19-144699">The way we use data is a life or death matter – from the refugee crisis to COVID-19</a>
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<p>Although he was no longer paid to train, he taught Judo on a voluntary basis. He became known in the local area and was even invited to share his story at the local university to educate students about racism. He offered IT support to fellow asylum seekers and began to explore the idea of opening an IT business.</p>
<p>He was finally granted refugee status in 2018 and he recalls feeling determined to move forward with life and start a business. “Before I started the pilot, I had to be a one man squad,” he said. “I spent a lot of very late nights trying to make the business work”. Support from the <a href="https://www.gov.uk/government/news/new-business-start-up-training-for-refugees-in-the-uk">UK pilot scheme</a> brought him closer to realising his ambition and gave him the morale boost he needed to carry on. But he said: </p>
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<p>I really felt the fear sometimes … It was difficult to be in the spotlight again. I had spent a long time away from social media, for example, to protect my privacy and safety. But through my volunteering experience at the community centre and now my business, I can see how I can help other people, especially those still struggling through asylum. This is my new dream.“</p>
</blockquote>
<h2>The financial advisor</h2>
<p>I shadow <a href="https://www.stokesentinel.co.uk/news/business/staffordshire-chamber-commerce-positive-pathways-3914817">Polly Hargreaves</a> as she sits at a community centre trestle table in Stoke-on-Trent speaking with a young lady who has applied to join the Centre for Entrepreneurs <a href="https://centreforentrepreneurs.org/programmes/refugee-pilot/">pilot programme</a>. Hargreaves helps advise refugees with an interest in entrepreneurship. She runs through a series of questions in a calm, clear voice before finally delivering the bad news: "I’m afraid until you have your (refugee) status, you are not allowed to join the programme. But please don’t be discouraged, there are a lot of things you can do so that when the time comes you will be ready.”</p>
<figure class="align-center ">
<img alt="Photograph of Polly Hargreaves" src="https://images.theconversation.com/files/369841/original/file-20201117-15-1tu7f30.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/369841/original/file-20201117-15-1tu7f30.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=835&fit=crop&dpr=1 600w, https://images.theconversation.com/files/369841/original/file-20201117-15-1tu7f30.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=835&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/369841/original/file-20201117-15-1tu7f30.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=835&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/369841/original/file-20201117-15-1tu7f30.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1049&fit=crop&dpr=1 754w, https://images.theconversation.com/files/369841/original/file-20201117-15-1tu7f30.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1049&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/369841/original/file-20201117-15-1tu7f30.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1049&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Polly Hargreaves.</span>
<span class="attribution"><span class="source">Polly Hargreaves</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>She runs through a list of ideas that the young woman is allowed to engage with while she is waiting for her claim for refugee status to be decided, including volunteering work and preparing for a driving theory test. She makes sure to add: “I know it is frustrating to wait, I have been there and I can tell you from my experience it is better to use the time wisely.”</p>
<p>Hargreaves, now in her 50s, came to the UK from Uganda more than 30 years ago, arriving alone at 17 with nothing more than a suitcase. She had been separated from her sister on the journey and wouldn’t find her again for several years. As she adjusted to life in the UK she was told that there were certain professions she could do and others that weren’t open to “someone like her”. </p>
<blockquote>
<p>But I had a dream to work in banking and finance, and so I got a place at university and worked hard. Eventually, I was able to achieve my dream.</p>
</blockquote>
<p>She had worked as a financial adviser for years but was always acutely aware of the challenges and barriers facing refugees. When she spotted a position as an adviser for a refugee entrepreneurship pilot project, she took a leap of faith and left her permanent job, feeling that she was well placed to help refugees wanting to start a business. She told me:</p>
<blockquote>
<p>I understand what it is like, it is not easy to start a business, but it can be even harder for people who have faced hardships and knock-backs as refugees. When my clients feel discouraged, I share my story and tell them, if I arrived with nothing but a suitcase and made something of my life, you can do it too. Sharing my story and my experience in business gives them the hope to keep going.</p>
</blockquote>
<h2>The stand-up coffee producer</h2>
<p>As we sit in the sunshine in an eccentric London coffee shop, Usman Khalid shares two things with me. The first is a business card for his socially conscious <a href="https://www.havencoffee.co.uk/">coffee brand</a>. He tells me he still hasn’t settled on a logo (which as a student of marketing at Birkbeck University, is something he is keenly focused on). The second thing he presents is a video of his stand-up comedy routine. I could easily be watching a seasoned comedian on Netflix. His on-stage persona is relaxed and understated like the man I now share coffee and cake with. He has the audience in stitches.</p>
<p><div data-react-class="InstagramEmbed" data-react-props="{"url":"https://www.instagram.com/p/Bs-g87OFrpB","accessToken":"127105130696839|b4b75090c9688d81dfd245afe6052f20"}"></div></p>
<p>As we chat it becomes apparent that his business, his enrolment as a UK student and his love of comedy are the recent developments in the longer story of his resettlement. Originally from Pakistan, he arrived in the UK in 2007 but it wasn’t until 2015 that he was granted refugee status. He said it was a harrowing process and he never imagined it would take so long. “The horrors of asylum are a story for another time,” he says.</p>
<blockquote>
<p>I’m not a refugee as a person, this is just my immigration status. It doesn’t mean anything on a personal, fundamental level.</p>
</blockquote>
<p>Instead, he prefers to tell me about his plans for the future and his experience with <a href="https://www.wearetern.org/">The Entrepreneurial Refugee Network</a>. He speaks often about his warm relationship with a business buddy assigned to support him as he developed his idea. “His surname is Short but he is very, very tall” jokes Khalid. “He is a great guy. He’s helped me develop and test my business. He helped me to update my CV so I can apply for a job. He even invited me to his house for dinner.” </p>
<p>He explains that this kind of support has been vital following the demoralising experiences he had as an asylum seeker that damaged his confidence. He is open about the personal ramifications of 11 years of asylum. </p>
<blockquote>
<p>Some days I would be full of energy and others days I just couldn’t get out of bed and face the world.</p>
</blockquote>
<p>He explained that during these times “my buddy and the business support team stuck with me so that at no point did I need to feel anxious or nervous”. Khalid is also a member of the <a href="https://www.anqacollective.org/">Anqa Collective</a>, a marketplace for refugee businesses (he and other Anqa members can be seen in the article’s lead image). As we wrap up our conversation and talk about plans for the Christmas break, he says he will be travelling to Paris. He has tried to book the trip several times but always backed out feeling too nervous to travel after such a long time. A couple of weeks later he sends me pictures and a message saying “my trip to France”. </p>
<figure class="align-center ">
<img alt="Man standing on a Paris street." src="https://images.theconversation.com/files/367945/original/file-20201106-15-1lklbg0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/367945/original/file-20201106-15-1lklbg0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=800&fit=crop&dpr=1 600w, https://images.theconversation.com/files/367945/original/file-20201106-15-1lklbg0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=800&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/367945/original/file-20201106-15-1lklbg0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=800&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/367945/original/file-20201106-15-1lklbg0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1005&fit=crop&dpr=1 754w, https://images.theconversation.com/files/367945/original/file-20201106-15-1lklbg0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1005&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/367945/original/file-20201106-15-1lklbg0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1005&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Usman on holiday in Paris in 2019.</span>
<span class="attribution"><span class="source">Usman Khalid</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<h2>Caterer and human rights campaigner</h2>
<p><a href="https://www.bbc.co.uk/news/uk-44309333">Majeda Khoury</a> is used to meeting and making connections over food. She runs a catering business in London and speaks with enthusiasm about the ability of food to cross cultural barriers and unite people. But she did not start out with a passion for either business or cooking. Her main interest is raising awareness of human rights issues in her native Syria. </p>
<p>In 2015 Khoury was imprisoned after she helped to feed refugees arriving in her city from other parts of Syria. The government, like other groups, was accused of using food as a weapon and preventing supplies reaching areas where people opposed it. But as a Christian woman, Khoury could pass through checkpoints. And so she used to smuggle bread to feed people because she refused to watch them starve. Fearing for the safety of her own family, Khoury fled to neighbouring Lebanon, leaving her sons behind with their father when they were 13 and 15.</p>
<p><div data-react-class="InstagramEmbed" data-react-props="{"url":"https://www.instagram.com/p/ByiSs9dJhJo","accessToken":"127105130696839|b4b75090c9688d81dfd245afe6052f20"}"></div></p>
<p>She then fled to the UK and explains how she found herself in the asylum system without her sons, without any friends and – critically – with a very limited ability to understand English. </p>
<blockquote>
<p>But I worked very hard. I practised everyday to improve. I also joined in with a cookery class for refugees hosted by <a href="https://www.migrateful.org/">Migrateful</a>, so that I could meet other people. I was alone here. Migrateful recognised my skills and invited me to cater for a special event.</p>
</blockquote>
<p><a href="https://www.migrateful.org/2017/11/13/siege-soup-syria/">The event</a> in question had 100 guests for whom she provided a simple soup from her home country. As part of the evening she spoke to the guests about a besieged area of Syria that was receiving very little attention or aid. </p>
<blockquote>
<p>I told them, people there don’t even have this soup to eat. Children are dying. I used Zoom to introduce them to a doctor in the area who talked about the difficulties. I asked them to write to their MP and provided them with some paper.</p>
</blockquote>
<p>She describes the 100 letters that were sent which prompted the government to invite her to parliament, resulting in the rescue of 29 children from the besieged city of Ghouta. She explains that attending the entrepreneurship programme gave her the skills she needed to turn these early experiences into a working business, that exists not only to provide her and her sons with a living (they subsequently joined her), but also provides a platform for her activist message to be heard.</p>
<h2>The COVID-19 effect</h2>
<p>The notion of setting up a business as a refugee is a little like setting up a business in a pandemic. On the face of it, there is just too much uncertainty for business to be a viable option. Yet the people I spoke to and others like them overcame the uncertainty and rebuilt dignified livelihoods. </p>
<p>By focusing on their businesses these refugees nurtured a sense of autonomy after enduring years of feeling like their lives were not theirs to control. Starting a business enabled them to make use of core competencies and learn new skills. And, as they established businesses they developed new relationships that supported their sense of belonging. </p>
<p>My research also found that, although “starting up” wasn’t right for everyone, involvement in business support initiatives spurred a wide range of positive outcomes, including further education and finding decent employment opportunities. Although some markets remain inaccessible during the pandemic, many refugees have been defying the odds and steadily launching businesses or taking other positive steps towards being ready to launch when the time is right. </p>
<p>Refugee entrepreneurship initiatives around the world are reinvigorating long standing conversations between public and private sector partners about how to engage with and support people emerging from uncertain and turbulent experiences. For example, the <a href="https://eeas.europa.eu/headquarters/headquarters-homepage_sq/72249/International%20community%20gathers%20in%20Geneva%20to%20support%20refugees%20and%20deliver%20more%20on%20Global%20Compact">Global Compact on Refugees</a> is looking to public private partnerships to “enhance refugee self reslience”. </p>
<p>The notion that entrepreneurship offers a route to greater autonomy has the potential to resonate across other sectors supporting marginalised groups. The refugee community has shown that entrepreneurship is not exclusively the domain of people with extensive networks – it also can help people build new networks. It is not only for those with abundant self-confidence and opportunities – it can also be for those who wish to build self-confidence to change their lives. Seen in this light, refugee entrepreneurs and communities are trailblazing paths out of uncertainty and can provide tremendous insight and inspiration at this unique and challenging time. </p>
<hr>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=112&fit=crop&dpr=1 600w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=112&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=112&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=140&fit=crop&dpr=1 754w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=140&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/313478/original/file-20200204-41481-1n8vco4.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=140&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p class="fine-print"><em><span>Michelle Richey received funding through the Centre for Entrepreneurs to conduct a UK pilot on behalf of the Home Office. She was also awarded a Capacity Building Grant by the British Academy of Management and Society for Advancement in Management Studies. </span></em></p>Refugee businesses provide opportunities for those who find that the doors to employment are often closed to them – even if they are well qualified.Michelle Richey, Lecturer in Technology and Entrepreneurship, Loughborough UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1284372019-12-10T14:25:14Z2019-12-10T14:25:14ZWhy the UK has no clear party of business<p>The Conservative Party is the self-styled party of business. Or at least it was until Boris Johnson’s notorious “<a href="https://www.bloomberg.com/news/articles/2018-06-26/f-business-i-was-referring-to-lobbyists-johnson-explains">fuck business</a>” response to concerns over Brexit. But there is also a longer history to these tensions. </p>
<p>Back in 1981, the Confederation of British Industry (CBI), the national lobby group for British business interests, was so angered by Conservative policies that it threatened to engage in a “<a href="https://books.google.co.uk/books?id=eEpdDwAAQBAJ&pg=PA190&lpg=PA190&dq=%25E2%2580%2598bare+knuckle+fight%25E2%2580%2599+tories+business+1983&source=bl&ots=zVGeaAHla6&sig=ACfU3U3dAFXDFEE4EFyHMNGNS90A0PO5ew&hl=en&sa=X&ved=2ahUKEwii2ZSRo5zmAhWRh1wKHXDtBmUQ6AEwFXoECAwQAQ#v=onepage&q=%25E2%2580%2598bare%2520knuckle%2520fight%25E2%2580%2599%2520tories%2520business%25201983&f=false">bare-knuckle fight</a>” with the Thatcher government.</p>
<p>No mainstream political party in Britain has ever declared itself as anti-business. In practice, most parties recognise the importance of meeting business needs. Governments are ultimately bound in their policy choices by the reality that they have to protect jobs, induce private investment and raise revenue by taxing companies.</p>
<p>Where parties differ is in choosing which businesses and which needs they will seek to satisfy and how. While all businesses need to make profit, not all businesses make profits in the same way, nor in the same volume. </p>
<p>Businesses are so diverse that it is impossible to satisfy all interests and, in practice, the policies that political parties pursue are likely to result in some businesses and sectors being <a href="https://www.palgrave.com/gp/book/9780333363119">privileged over others</a>. The business models of some companies depend on low wages, low taxes and weak regulations. Others depend on market access, high skills and good labour relations. Still others make most or all of their profits based on winning government contracts. </p>
<p>The policies required to satisfy these different <a href="https://www.cambridge.org/core/journals/journal-of-social-policy/article/taking-back-control-or-empowering-big-business-new-risks-to-the-welfare-state-in-the-postbrexit-competition-for-investment/D0481679DFA46F94840BE9CFC0AC1D76">needs vary widely</a>. And the implications for workers and citizens are huge.</p>
<p>We also have to distinguish between the short and long-term interests of business and separate the politics of business people from business institutions. For Matt Ridley, former chair of the bank Northern Rock prior to its collapse in the 2008 financial crisis, the party of choice was the Conservatives. But while Ridley <a href="https://www.parliament.uk/biographies/lords/viscount-ridley/4272">leaned towards the Conservative Party</a> and lobbied hard for less government, what Northern Rock needed to stave off collapse was greater regulation and then a <a href="https://journals.sagepub.com/doi/full/10.1177/0010414013488540">massive injection of public funds</a>.</p>
<p>These various tensions have become more complex over the past 40 years as a result of <a href="https://reader.elsevier.com/reader/sd/pii/002463019090009S?token=5A06136908AB08ADEE2598DA4FEB7490BC007F3014E9222F66B32ADDF7E09717B4B7BF1356014F3249931DCD5E9BEA20">the globalisation of manufacturing</a>, the emergence of <a href="https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785547/unlocking_digital_competition_furman_review_web.pdf">digital markets that are dominated by a few big businesses</a>, and the increasing <a href="https://link.springer.com/chapter/10.1057/9781137265821_2">influence of financial elites over economic policy</a>. </p>
<p>These transformations have worked to deepen long-established cultural and strategic differences between business elites. So to understand which party policies may be better for business we need to cut through crude electoral signalling and <a href="https://www.cbi.org.uk/media-centre/articles/labours-renationalisation-plans-will-profoundly-harm-uk/">the distrust that business elites have</a> toward public ownership. We also need to differentiate between short and long-term business interests and the competing interests of different types of business and economic sectors.</p>
<h2>The manifestos compared</h2>
<p>Both parties promise to reduce taxes for small businesses, increase investment in and support for businesses, and tackle tax avoidance. The <a href="https://assets-global.website-files.com/5da42e2cae7ebd3f8bde353c/5dda924905da587992a064ba_Conservative%202019%20Manifesto.pdf">Conservatives state</a> they “will always be wholeheartedly on the side of business”. </p>
<p>But Labour’s commitments are conditional upon good corporate behaviour. The <a href="https://labour.org.uk/wp-content/uploads/2019/11/Real-Change-Labour-Manifesto-2019.pdf">party’s manifesto</a> promises to rein in corporate power and tackle companies that exploit workers and consumers.</p>
<p>More generally, Labour and Conservative proposals represent two radically distinct visions for business and the economy. Along with “getting Brexit done”, <a href="https://assets-global.website-files.com/5da42e2cae7ebd3f8bde353c/5dda924905da587992a064ba_Conservative%25202019%2520Manifesto.pdf">Conservative plans for business</a> centre on several modest proposals, selectively sampled and adapted from the <a href="https://www.cbi.org.uk/media/3785/12543_programme-for-prosperity-manifesto.pdf">CBI’s recommendations</a> for reducing business costs and encouraging investment. </p>
<p>These include a review of business rates, raising tax breaks including employment allowance (from £3,000 to £4,000) and the Research and Development (R&D) tax credits. Plus, the Conservatives’ planned National Skills Fund aims to address skills shortages in the economy by providing individuals and small and medium-sized enterprises with matched funding for education and training.</p>
<p><a href="https://labour.org.uk/wp-content/uploads/2019/11/Real-Change-Labour-Manifesto-2019.pdf">Labour’s plans</a>, by comparison, purposefully aim to be transformative. They are designed to address both short and long-term problems within British capitalism. Labour proposes a joined-up approach to addressing key socioeconomic and environmental risks from climate change to <a href="https://www.josharcher.uk/static/files/2013/Industrial-Performance-1870-2010.pdf">chronic under-investment</a> and <a href="http://speri.dept.shef.ac.uk/wp-content/uploads/2018/11/SPERI-Paper-28-Innovation-research-and-the-UK-productivity-crisis.pdf">sluggish productivity growth</a>. </p>
<p>Labour envisages a more interventionist, entrepreneurial state. It plans a £400 billion National Transformation Fund to underwrite renewable and low-carbon energy and transport, and the <a href="https://www.ft.com/content/d68bef84-07b8-11ea-a984-fbbacad9e7dd">phased nationalisation</a> of key industries. </p>
<p>Perhaps most significantly, the party’s proposal for a National Investment Bank, backed up by a network of Regional Development Banks, aims to shift how money is created in the economy. Loans (new money) will be given to projects that decarbonise the economy and increase productivity. The initiative effectively aims to shift money creation away from property and rent-seeking <a href="https://theconversation.com/ending-austerity-create-a-national-investment-bank-103559">towards more productive forms of investment</a>.</p>
<h2>Brexit, investment and immigration</h2>
<p>In terms of its impact on business, taking the UK out of the EU single market represents the Conservative Party’s most far-reaching policy.</p>
<p>On the whole, major UK-based businesses <a href="https://www.cbi.org.uk/media/3785/12543_programme-for-prosperity-manifesto.pdf">oppose looser ties with the EU</a> and are <a href="https://www.theneweuropean.co.uk/top-stories/carolyn-fairbairn-cbi-political-speeches-1-6380680">ambivalent about wholesale deregulation</a>. Brokering an <a href="https://www.instituteforgovernment.org.uk/sites/default/files/publications/IFGJ5896-Brexit-Report-171214-final_0.pdf">all-encompassing deal</a> with the EU, <a href="https://ec.europa.eu/trade/policy/eu-position-in-world-trade/index_en.htm">still the world’s largest economy</a>, and redrawing <a href="https://publications.parliament.uk/pa/cm201719/cmselect/cmintrade/520/520.pdf">trade and investment agreements</a> with other countries is enormously risky.</p>
<p>Beyond this, Brexit looks set to damage British-based business in several key respects. Businesses with complex, cross-border supply chains are concerned about the additional costs associated with administration, border delays and tariffs. Further, the Conservatives’ proposed increase in R&D tax credits is a drop in the ocean when set against estimates of the impact Brexit is projected to have on <a href="http://cep.lse.ac.uk/pubs/download/brexit03_technical_paper.pdf">foreign direct investment (FDI)</a> into the UK. </p>
<p>The proposal will reduce corporate tax bills among a relatively <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/413629/HMRC_WorkingPaper_17_R_D_Evaluation_Final.pdf">small number of large firms</a>, but is unlikely to boost investment significantly. The <a href="https://www.ippr.org/files/publications/pdf/cej-industrial-strategy-steering-change-in-the-uk-economy-november-2017.pdf">best estimate</a> suggests that between 57% and 80% of R&D tax credits are “dead weight”, subsidising spending which would have happened anyway. </p>
<p>Skills shortages after Brexit are also a key area of concern. Both the <a href="https://www.ft.com/content/a0c4c69c-092e-11ea-b2d6-9bf4d1957a67">CBI and British Chamber of Commerce</a> have taken issue with Conservative plans for a points-based immigration system.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/306111/original/file-20191210-95120-ck4i7a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/306111/original/file-20191210-95120-ck4i7a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=419&fit=crop&dpr=1 600w, https://images.theconversation.com/files/306111/original/file-20191210-95120-ck4i7a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=419&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/306111/original/file-20191210-95120-ck4i7a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=419&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/306111/original/file-20191210-95120-ck4i7a.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=526&fit=crop&dpr=1 754w, https://images.theconversation.com/files/306111/original/file-20191210-95120-ck4i7a.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=526&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/306111/original/file-20191210-95120-ck4i7a.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=526&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Brexit will be a huge rupture for business.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/brexit-blue-european-union-flag-great-1134098342?src=ebdbf066-fae8-4697-bb39-64ee26c59742-1-4&studio=1">Shutterstock.com</a></span>
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<p>Labour’s plans on Brexit – a choice between remain or keeping the UK <a href="https://www.ft.com/content/85d1ebc4-0c55-11ea-b2d6-9bf4d1957a67">closely aligned with the EU</a> on trade, the environment and workers’ rights – sidestep many of these risks. On the face of it, they fit closely with the expressed wishes of business.</p>
<h2>Nationalisation and share transfers</h2>
<p>Where business and Labour seem furthest apart is on Labour’s nationalisation programme. The CBI has gone so far as to argue that Labour’s proposed programme of public ownership is “<a href="https://www.cbi.org.uk/articles/next-year-will-define-uk-for-a-generation/">at least as damaging</a>” as a hard Brexit. It <a href="https://www.cbi.org.uk/media/3785/12543_programme-for-prosperity-manifesto.pdf">says</a>: “Mass-scale state intervention [has] left business questioning the stability of the UK as an investment destination.” </p>
<p>Whether nationalisation would affect private investment in reality is a moot point. Much depends on <a href="https://www.theguardian.com/business/2019/nov/24/power-firms-move-ownership-offshore-to-protect-against-labour-renationalisation">how industries are brought into public ownership</a>. As to broader questions concerning the relative advantages of private versus state ownership on productivity, efficiency and profitability, the evidence <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/apce.12092?casa_token=ZoxwPNu6G4wAAAAA%253ARBY9qHNaH8p-_AFvWlM9P2swYk4aXeADxHinKr4y7g4JcI4T__WtbTZssY9TTJ05RGoeBJf2wGK5pPH-">is contested</a>. </p>
<p>Labour’s other justifications for nationalisation – eliminating profiteering and ensuring greater access – are less contested, in part because they are driven more by political principle than evidence. What is clear is that the types of national ownership planned by Labour are commonplace in other major developed <a href="http://www.spokesmanbooks.com/acatalog/Dexter_Whitfield.html-">capitalist economies</a>.</p>
<p>Other areas of disagreement between Labour and business are taxation and <a href="https://theconversation.com/why-labour-should-focus-on-putting-workers-on-boards-not-inclusive-ownership-funds-127473">transferring company shares to workers</a>. Labour’s <a href="https://labour.org.uk/wp-content/uploads/2019/11/Real-Change-Labour-Manifesto-2019.pdf">promise to reverse</a> Tory cuts to corporation tax bucks the trend of successive governments, which have tried to reduce taxes on businesses. Meanwhile, the proposal that large companies set up <a href="https://labour.org.uk/wp-content/uploads/2019/11/Real-Change-Labour-Manifesto-2019.pdf">Inclusive Ownership Funds</a> to give workers a stake in the companies they work for has also attracted <a href="https://www.cbi.org.uk/media-centre/articles/cbi-responds-to-labour-proposals-on-employee-ownership/">criticism from business</a>. </p>
<p>There are precedents elsewhere for both these policies and neither is strictly incompatible with profitability. They do, however, run against the prevailing UK business model.</p>
<p>Ultimately, there are major uncertainties about how Labour and Conservative policies will play out in practice. This is to be expected, given that both parties are proposing widespread interruption to “business as usual”. The Tories offer Brexit – Labour is proposing a radical rewriting of the UK’s business model. </p>
<p>In practice, businesses could thrive with either programme. In the febrile atmosphere of the current election campaign, what is often overlooked is that businesses do well in other nations which practice different varieties of capitalism.</p>
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<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=140&fit=crop&dpr=1 600w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=140&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=140&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=176&fit=crop&dpr=1 754w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=176&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/300096/original/file-20191104-88414-1yh2yvf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=176&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p><em><a href="https://theconversation.com/uk/newsletters/the-daily-newsletter-2?utm_source=TCUK&utm_medium=linkback&utm_campaign=TCUKGE2019&utm_content=GEBannerB">Click here to subscribe to our newsletter if you believe this election should be all about the facts.</a></em></p><img src="https://counter.theconversation.com/content/128437/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Kevin Farnsworth is a member of the Labour Party. </span></em></p><p class="fine-print"><em><span>Gary Fooks is a member of the Labour Party.</span></em></p>The Conservatives and Labour have two radically distinct visions – but both propose widespread interruption to ‘business as usual’.Kevin Farnsworth, Reader in International Social Policy, University of YorkGary Fooks, Reader in Sociology and Public Policy, Aston UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1160832019-04-29T12:14:20Z2019-04-29T12:14:20ZShopping trends mean blocking the big Sainsbury’s-Asda merger may not protect customers<figure><img src="https://images.theconversation.com/files/271449/original/file-20190429-194620-ka977c.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Staying separate.</span> <span class="attribution"><span class="source">John David Photography / Shutterstock.com</span></span></figcaption></figure><p>The proposed merger of supermarkets Sainsbury’s and Asda is now off the table as the regulator <a href="https://theconversation.com/sainsburys-asda-merger-failed-big-bet-has-serious-strategic-consequences-116012">has ruled against it</a>, saying it would lead to higher prices for consumers. The merger would have created the largest supermarket in the UK in an already concentrated market where the market shares of the top four players add up to <a href="https://www.kantarworldpanel.com/en/grocery-market-share/great-britain">a whopping 68% of the total market</a>. </p>
<p>Under any other circumstance, it would have made a lot of sense to block a merger of this scale. But given the conditions at this time in food retail, stopping this deal won’t necessarily protect customers. There is fierce competition in the industry, ruling out the possibility of increasing prices.</p>
<p>Supermarkets have been hit by <a href="https://www.about.sainsburys.co.uk/investors/annual-report-2018">multiple disruptions</a> in the past couple of decades, and the traditional way of shopping for groceries in big stores has been declining, replaced by discount stores, convenience stores, and online shopping.</p>
<p>The biggest challenge comes from the new discounters like Aldi and Lidl. They put even the traditional UK discounters such as Wal-Mart’s Asda to shame with their hard-to-match low prices. The Aldi phenomenon has swept through the UK. It has opened numerous new stores since 1990, luring customers with aggressive prices, good quality products, and advertising that trumpets blunt price comparisons. </p>
<p>Among several factors that drive Aldi’s cost advantage is its no-frills, small store format, stocked mostly with own brand products. This gives the company the ability to work with and negotiate the best prices <a href="https://www.npr.org/sections/thesalt/2017/09/27/552384150/discount-grocers-aldi-and-lidl-give-u-s-stores-a-run-for-their-money?t=1556369139095">from their long-term suppliers</a>. Further savings are made by having customers do some of the work, such as opening boxes and taking carts back. And the product selection is very limited, with one or two choices for most products. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/271448/original/file-20190429-194606-4jdfll.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/271448/original/file-20190429-194606-4jdfll.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/271448/original/file-20190429-194606-4jdfll.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/271448/original/file-20190429-194606-4jdfll.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/271448/original/file-20190429-194606-4jdfll.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/271448/original/file-20190429-194606-4jdfll.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/271448/original/file-20190429-194606-4jdfll.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Supermarket disruptors.</span>
<span class="attribution"><span class="source">JFs Pic S. T / Shutterstock.com</span></span>
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</figure>
<p>These days, Aldi and Lidl are no longer underdogs. Together, they command over 13% of the market, as the <a href="https://www.kantarworldpanel.com/en/grocery-market-share/great-britain">fifth- and seventh-biggest players in UK</a>. Their model is the antithesis of the mainstream supermarket business model, which is based on a large variety of products, alternative brand choices, customer service, and in some cases store ambience and experience. </p>
<h2>Changing habits</h2>
<p>While the traditional supermarket model hasn’t entirely lost its appeal, consumer expectations and shopping habits have changed in multiple ways. Today’s consumers prefer lower prices, but they also want high quality fresh produce and other products. They value convenience in shopping, but they also shop in multiple stores to get what they want. Increasing numbers are shopping online. But supermarkets still haven’t figured out the best way to respond to these disruptive changes. </p>
<p>When customers shop more locally and frequently, the large-format supermarkets outside of town and city centres no longer generate enough sales. The grocery business is a high-volume, low-margin trade where steady customer traffic matters. Without high sales volume and fast inventory turnover, supermarkets cannot cover their “fixed costs” like rent, technology and staff. Opening new convenience stores helps to reclaim the lost business but doesn’t compensate for diminishing large store margins. </p>
<p>When it comes to the steady growth of online food shopping, all major players offer this, but they often rely on the click-and-collect method, which has marginal profitability due to added labour costs. Highly-automated fulfilment centres are more efficient, but they require substantial investments upfront. </p>
<p>Adding up the loss of sales to convenience, discounters, and online, many traditional UK food stores are suffering from reduced profitability. </p>
<h2>Bold and risky</h2>
<p>Enter the Sainsbury’s-Asda merger. This was a <a href="https://theconversation.com/sainsburys-and-asda-merger-its-all-about-market-share-95822">bold and risky move</a> as it would have increased both companies’ exposure to retail disruption. But it would have also given the merged companies a stronger base to respond to discounters and the online shopping trend.</p>
<p>Food manufacturing firms have much <a href="https://www.forbes.com/sites/sageworks/2017/09/24/these-industries-generate-the-lowest-profit-margins/#6e91c608f49d">better profit margins</a> than supermarkets. So increasing their power against key suppliers is one way supermarkets are trying to survive. While this may not have enabled either company to match Aldi-Lidl prices, they could have narrowed the gap.</p>
<p>Sainsbury’s also planned to leverage Asda stores for Argos pickups, a catalogue retailer owned by Sainsbury’s. This would have helped them better use their big stores, while expanding the reach of Argos. Plus, a combined response to online sales would have created significant economies of scale when investing in the necessary infrastructure to meet customer demand for online shopping.</p>
<p>So blocking the Sainsbury’s-Asda deal may strengthen the hands of Aldi and Lidl. Perhaps that’s good news as they can grow and make their low prices available to more customers. But there may be other implications. </p>
<p>Customers today enjoy having the luxury of shopping at different types of stores. A rapid rise of new discounters and online models may not allow enough time for supermarkets to adapt and traditional store options may fade away as a result, reducing options for consumers in the future. </p>
<p>Even if they survive, an increasingly singular focus on price competitiveness and cost cutting can have other consequences. It can harm farmers and food producers with little power to negotiate, leading to the loss of small and midsize farms or putting added pressure on the environment and farm worker health. Plus, food quality may suffer under pressure to rapidly cut costs. </p>
<p>Aldi and Lidl have managed to achieve good environmental standards along with efficiency by working with their suppliers over a long period of a time, albeit for a relatively narrow range of products. If other players are pushed to match the cost advantages for a substantially larger range of products in a short time period, compromises in other important areas can happen. So more competition may not turn out to be better for consumers after all.</p><img src="https://counter.theconversation.com/content/116083/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yasemin Kor is affiliated with Cambridge Global Food Security Initiative. </span></em></p>Supermarkets have been hit by multiple disruptions in the past couple of decades and they are struggling to survive.Yasemin Kor, Beckwith Professor of Management Studies, Cambridge Judge Business SchoolLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1121952019-03-13T11:10:19Z2019-03-13T11:10:19ZBrexit may usher in point of no return for UK tech start-up scene<figure><img src="https://images.theconversation.com/files/263366/original/file-20190312-86696-slu82h.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Other European cities have been quick to sense opportunities from Brexit.</span> <span class="attribution"><a class="source" href="https://twitter.com/charles_hawley/status/750275297740816384">Charles Hawley/Twitter</a></span></figcaption></figure><p>Sifting through the noise to really understand what impact Brexit and all the uncertainty that it brings is having on the UK’s technology start-up scene, it’s possible to see a picture emerging. It is one that should cause serious concern for anyone with an interest in keeping the UK at the centre of Europe’s technology sector. </p>
<p>In The Sun Also Rises by Ernest Hemingway, the American Bill Gorton says to Mike Campbell, a Scot: “How did you go bankrupt?”</p>
<p>“Two ways,” Mike replies. “Gradually, then suddenly”. </p>
<p>This seems very appropriate, given that there are a number of factors that, combined, could now usher in the beginning of a collapse of the thriving ecosystem of high-tech start-ups which has been one of the few rays of hope in a moribund UK economy over the past ten years. What happens in the days, weeks and months to come will determine whether that collapse accelerates.</p>
<h2>1. End of free movement</h2>
<p>It is estimated that approximately <a href="https://www.zdnet.com/article/the-brexit-dilemma-will-londons-start-ups-stay-or-go/">20% of staff in London-based start-ups are from the EU</a>, something the core EU principle of free movement of labour has undoubtedly encouraged. The UK government should want to continue to encourage highly skilled workers to come to the UK, and <a href="https://www.theguardian.com/uk-news/2018/oct/02/uk-immigration-what-is-the-government-proposing">recent pronouncements by ministers confirm this</a>. </p>
<p>However, other government commitments to reduce immigration levels to under 100,000 a year alongside lobbying from other sectors that rely heavily on migrant labour such as agriculture, healthcare and teaching, could see start-ups struggle to find the right skills. There is also a perception issue among young EU workers: that the UK is not such a friendly place to live and work. While <a href="https://www.theguardian.com/politics/2017/aug/27/million-skilled-eu-workers-planning-to-leave-uk-brexit">reports of this are largely anecdotal</a>, perception matters.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/263367/original/file-20190312-86690-13xxd0y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/263367/original/file-20190312-86690-13xxd0y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/263367/original/file-20190312-86690-13xxd0y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/263367/original/file-20190312-86690-13xxd0y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/263367/original/file-20190312-86690-13xxd0y.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/263367/original/file-20190312-86690-13xxd0y.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/263367/original/file-20190312-86690-13xxd0y.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<span class="caption">Might ‘Silicon Roundabout’ be, in the future, just a roundabout?</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/london-england-9-may-2015-view-702239383">Vicky Jirayu/Shutterstock</a></span>
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</figure>
<h2>2. Decline in early stage funding</h2>
<p>UK investment tracking company Beauhurst monitors venture capital and public funding of start-ups, and records that overall funding <a href="http://www.cityam.com/272725/british-startups-hit-funding-drop-last-year-fintech-bucks">fell from £8.27 billion in 2017 to £7 billion in 2018</a>. This is not necessarily a cause for concern in itself as 2017 had been an exceptional year. But there has also been a <a href="https://www.telegraph.co.uk/technology/2019/02/05/early-stage-funding-uk-startups-drops-15pc-four-year-low/">15% fall in seed stage funding</a>, and this is more worrying. </p>
<p>Seed funding for very early stage companies forms the beginning of the overall investment pipeline, and declines here will create shockwaves that will ripple through the UK innovation landscape for years to come. As Beauhurst acknowledge, a significant and sustained drop in seed funding could be the canary in the coalmine for the longer term health of the UK tech scene.</p>
<h2>3. Fall in EU research funding</h2>
<p>EU funding for academic research at UK universities is an important source of income. Between 2007 and 2013 the EU contributed <a href="https://royalsociety.org/topics-policy/projects/uk-research-and-european-union/role-of-EU-in-funding-UK-research/how-much-funding-does-uk-get-in-comparison-with-other-countries/">€8.8 billion to UK academic research</a> and the current Horizon 2020 programme has awarded <a href="https://www.gov.uk/government/publications/horizon-2020-funding-if-theres-no-brexit-deal/horizon-2020-funding-if-theres-no-brexit-deal--2">almost €5 billion so far</a>. To what extent UK universities are able to access EU finds in the future will depend on what, if any, deal is struck. </p>
<p>A no-deal scenario would certainly have a serious negative impact on a range of important research programmes and projects in the UK. Universities are a vital source of expertise for start-ups, particularly in high-growth areas such as artificial intelligence, data modelling and machine learning. Like seed funders, they form a vital first stage in the pipeline of innovation.</p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"750275297740816384"}"></div></p>
<h2>4. Incentives from EU cities</h2>
<p>While the overall impact of Brexit on the economy looks likely to be a negative one, it is an opportunity for other EU member states. Financial incentives offered by capitals such as Paris, Berlin, Amsterdam and Lisbon are proving attractive for businesses considering locations to start a company, or for those looking to relocate from London. We have yet to see large numbers of companies move abroad, but a recent survey of 100 early stage London-based start-ups <a href="https://thefintechtimes.com/heres-what-london-startups-are-saying-about-brexit-uncertainty/">said they have considered relocating their operations</a>.</p>
<p>Ultimately, whether they act on these concerns will depend on whether a Brexit deal is reached or not, and how that plays out in the legal realm. In a sector that is heavily dependent on the collection, manipulation and commercialisation of data, much of it personal, the extent to which the UK adheres to the European GDPR data protection regime will be an important factor. A need to conform to EU data protection rules in order to access European markets could make relocating to an EU member state a much more attractive proposition.</p>
<p>So as with most things Brexit there is still a large degree of uncertainty to how high-tech start-ups will react to the changes that are coming. But if Hemingway was right in his view of bankruptcy then a point may occur when the UK suddenly loses its appeal as a European hub for innovation, and all the job and wealth creation that goes with it.</p><img src="https://counter.theconversation.com/content/112195/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Martin De Saulles does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Always delicate balancing act, ensuring London maintains its appeal to tech start-ups will prove more difficult after Brexit.Martin De Saulles, Principal Lecturer, University of BrightonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1109132019-02-22T10:29:19Z2019-02-22T10:29:19ZWhy big businesses move their headquarters around the world – tax, talent and trepidation<figure><img src="https://images.theconversation.com/files/259277/original/file-20190215-56204-bhohk6.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/double-exposure-global-world-map-on-577182709?src=wz476NqmzlJkbKNH_Y0NNg-1-75">Shutterstock</a></span></figcaption></figure><p>Ever since the <a href="https://theconversation.com/uk/brexit">EU referendum of 2016</a>, well-known companies have announced decisions to relocate outside of the UK. Electronic giant Panasonic has <a href="https://www.bbc.co.uk/news/business-45351288">gone to Amsterdam</a>, where <a href="https://edition.cnn.com/2019/01/23/business/sony-europe-hq-brexit-netherlands/index.html">Sony will soon follow</a>. Ferry company P&O will <a href="https://uk.reuters.com/article/uk-britain-eu-p-o/po-to-change-flag-of-uk-ships-to-cyprus-ahead-of-brexit-idUKKCN1PG1KA">shift registration</a> of its vessels to Cyprus, while the engineering firm <a href="https://www.theguardian.com/technology/2019/jan/22/dyson-to-move-company-hq-to-singapore">Dyson is moving</a> its corporate headquarters to Singapore.</p>
<p>There is nothing new about big businesses relocating their corporate headquarters. Back in 2003 the United Nations Conference on Trade and Development was <a href="https://unctad.org/en/pages/PressReleaseArchive.aspx?ReferenceDocId=3768">hailing the arrival</a> of a world market for such possibilities. And even iconic American companies have decided to move, including Burger King (to Canada), Budweiser (to Belgium), and Lucky Strike (to the UK). So why do they do it? And what are the benefits of moving? </p>
<p>One of the most obvious and compelling reasons to move is the desire to increase profits. There can be huge tax breaks associated with being a legal entity registered in a tax haven. Ireland, Switzerland and Panama have <a href="https://www.irishtimes.com/business/economy/ireland-is-the-world-s-biggest-corporate-tax-haven-say-academics-1.3528401">all attracted</a> this kind of investment. </p>
<p>But a move like this comes with potential costs however. Companies risk damage to their reputation – including accusations of tax avoidance and unethical behaviour, while the countries they move to face <a href="https://www.independent.co.uk/news/business/news/eu-tax-haven-offshore-avoidance-countries-blacklist-latest-a8092826.html">increased scrutiny</a>. </p>
<p>Another reason to relocate is to base the business in a major financial centre such as London, New York, Frankfurt or Hong Kong. Firms that do this may be motivated by better opportunities to raise capital and have access to highly specialised talent. This kind of move is particularly popular with businesses from emerging economies as it shows a commitment to robust legal standards and business practices. This can enhance their reputation (and subsequently, performance). </p>
<p>Finally, businesses sometimes relocate as a result of an acquisition. When a company is bought up by another company, its corporate location may switch to that of the buyer – this is what happened when Budweiser moved to Belgium, after it was <a href="https://www.washingtonpost.com/news/business/wp/2014/09/23/nations-most-iconic-beer-brands-are-being-bought-by-foreign-investors-so-what/">bought by InBev</a>. </p>
<p>Yet despite all these motives to relocate, for many multinationals there is no place like home. This could be because it is where the founder is from, and where they managed to provide a solution to a business problem which existed in that country – where an entire ecosystem crucial for setting up the business exists, and where the main stakeholders are. </p>
<p>So when a relocation of a corporate headquarters happens, as in the case of Dyson and P&O, push factors may be at play too. Some corporations decide to relocate when the home country ecosystem that has made them competitive in the first place is damaged, and the perceived advantages of a new home market are higher than the perceived advantages of their country of origin. </p>
<p>This is where Brexit clearly matters for many businesses that have their corporate headquarters in the UK. When uncertainty strikes, when there are worries about attracting talent, when the legislative regime is unclear and the quality of the services available is under threat, the issue of where the headquarters should be located becomes salient. </p>
<h2>Why worry?</h2>
<p>The economic impact of relocation varies. Some corporate headquarters have very limited functions and only a limited number of staff, while others are larger employers, so the job losses differ from case to case. Nevertheless, the jobs that are relocated are usually highly skilled, specialised jobs that are very well paid and often highly taxed. Corporate tax revenue losses may also be significant.</p>
<p>Also, the economic impact goes far beyond the company itself. A relocation can lessen demand for highly specialised services such as legal advice, banking, and logistics – all of which have a negative effect on the economic ecosystem of the home country and its ability to attract future investors.</p>
<p>Last but not least, relocation is highly symbolic. While some businesses choose to relocate to show a commitment to a new region (where arguably their most important customers and competitors are) this move surely sends to opposite message to their former home country – a country that no longer fully meets the needs of an investor with global ambitions.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/259283/original/file-20190215-56246-udx16p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/259283/original/file-20190215-56246-udx16p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=376&fit=crop&dpr=1 600w, https://images.theconversation.com/files/259283/original/file-20190215-56246-udx16p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=376&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/259283/original/file-20190215-56246-udx16p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=376&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/259283/original/file-20190215-56246-udx16p.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=473&fit=crop&dpr=1 754w, https://images.theconversation.com/files/259283/original/file-20190215-56246-udx16p.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=473&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/259283/original/file-20190215-56246-udx16p.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=473&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">The attractive alternative of Amsterdam.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/bike-over-canal-amsterdam-city-picturesque-797232592?src=Ej4LeXNDXa-kde6gEzVcWg-1-5">Shutterstock</a></span>
</figcaption>
</figure>
<p>Investor confidence is crucial to make or break an investment destination, and investors often follow the decisions of others. With the continuing uncertainty of Brexit, it is likely that more companies will decide to relocate. Those who set up their regional headquarters in the UK as a stepping stone for further expansion in the EU will be no doubt be thinking of a change, while many EU governments are doing their best to lure them away. </p>
<p>Amsterdam has already snapped up Sony and Panasonic through its location, competitiveness and excellent quality of life. Dublin is hoping to appeal to US investors through the shared language, historical links between the two countries, a welcoming investment climate and tax breaks. Berlin, the <a href="https://www.uktech.news/news/berlin-becoming-europes-number-one-tech-hub-20180905">new start-up capital</a> of Europe, is trying to attract UK entrepreneurs with its low set-up costs, good higher education institutes and infrastructure, as well as a young and diverse talent pool. Paris is aiming to lure international banks away from the City of London by <a href="https://www.theguardian.com/business/2017/jul/07/france-london-banks-brexit-paris-taxes">easing regulation</a>. </p>
<p>Soon after the EU referendum, a <a href="https://home.kpmg/xx/en/home/campaigns/2016/06/ceo-outlook.html">KPMG survey</a> showed that 76% of the 1,300 CEOs surveyed around the world were looking to relocate the headquarters of their firms. Although some of the CEOs’ opinions may have changed since then, there has certainly been a recent trend in moving headquarters away from the UK. If too many companies decide to join them, there will be worrying times for those left behind.</p><img src="https://counter.theconversation.com/content/110913/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Carmen Raluca Stoian does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The economic impact of losing big business.Carmen Raluca Stoian, Lecturer in International Business, University of KentLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1104612019-01-24T16:03:25Z2019-01-24T16:03:25ZDyson’s move may not be about Brexit – but the timing was bound to fan flames<p>If a private company with around 5,000 employees moved its headquarters overseas a few years ago, it might not have attracted much attention beyond concerns for the local economic impact. But these are no ordinary times. </p>
<p>The announcement that <a href="https://www.theguardian.com/technology/2019/jan/22/dyson-to-move-company-hq-to-singapore">Dyson is switching its HQ</a> from the English county of Wiltshire to Singapore has <a href="https://www.theweek.co.uk/99153/twitter-reacts-to-dyson-s-singapore-move">provoked a huge reaction</a>. The company was keen to downplay any possible link between the move and Brexit (of which Sir James Dyson is a vocal supporter). Nevertheless, the news has attracted many critics, many of them not typically engrossed with long term corporate strategy.</p>
<p>There are valid reasons to accept Dyson’s statement at face value when understanding why the HQ move makes business sense. While Dyson still experiences a stable level of growth in its established European and American markets, this is dwarfed by a <a href="https://www.theguardian.com/technology/2018/mar/01/dyson-hoovers-up-801m-profit-in-asian-spending-boom">vast sales increase</a> in Asia. </p>
<p>To capitalise on this growing market, the company has already <a href="https://www.bbc.co.uk/news/business-45950377">established Singapore</a> as a production base for its electric cars, along with its assembly work taking place in Malaysia and the Philippines. </p>
<p>Singapore has also <a href="https://www.channelnewsasia.com/news/asia/singapore-china-sign-free-trade-agreement-upgrade-10922790">recently agreed</a> a bilateral free trade pact with China, allowing Dyson to enjoy a level of market access that would not be available in the UK or the EU.</p>
<p>Dyson was also quick to allay fears regarding its employees in the UK. As production has largely moved overseas in the last decade, nearly all of its workforce in the UK are employed as scientists or engineers (where the majority of their products are designed and developed). And as the company continues to expand its research activities and significantly invest in graduate careers and academic research, there are no clear signs that the move will affect its economic activity in the UK for the foreseeable future.</p>
<p>While this all gives Dyson a defence for a strategic move, it is also easy to understand why this announcement has attracted criticism. First, the timing is notable, in a week when several other companies drew attention for their strategic decisions. </p>
<p><div data-react-class="Tweet" data-react-props="{"tweetId":"1087770431300472833"}"></div></p>
<p>These include Sony (which is <a href="https://www.bbc.co.uk/news/business-46968720">moving its European headquarters</a> to the Netherlands), P&O (re-flagging its UK registered English Channel fleet <a href="https://news.sky.com/story/po-post-brexit-plan-to-register-channel-fleet-in-cyprus-11614554">to Cyprus</a>) and Pets at Home (<a href="https://news.sky.com/story/pets-at-home-to-stockpile-up-to-8m-of-products-in-case-of-hard-brexit-11614312">announcing a possible</a> stockpiling of its inventories). </p>
<p>What’s different about these announcements is their explicit link to issues concerning Brexit. This pragmatism was also evident in the CEO of Airbus <a href="https://www.bbc.co.uk/news/business-46984229">hinting at relocating</a> the company’s operations. (He was also very blunt about the damage that a no-deal Brexit could potentially cause.) </p>
<h2>Business abhors a vacuum</h2>
<p>While it may be perfectly true that Dyson’s relocation has little to do with Brexit, announcing it when many other businesses are publicly expressing opinions on Brexit (that on the surface appear quite opposed to Sir James’s personal views) means it is inevitable that it will be discussed in the context of the surrounding news.</p>
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<p>Another factor gives critics of Brexit further ammunition against Dyson. The move to Singapore appears to highlight the perceived disconnect between Brexit’s most affluent supporters and <a href="https://www.theguardian.com/business/2018/oct/30/no-deal-brexit-would-trigger-lengthy-uk-recession-warns-sp">concerns</a> over average living standards in the immediate aftermath of any Brexit. </p>
<p>For well-known figures such as Dyson, any public support of Brexit can risk accusations of being out of touch with ordinary citizens (ironically, a similar charge to that often levelled at visible Remain campaigners).</p>
<p>Some <a href="http://lordashcroftpolls.com/2016/06/how-the-united-kingdom-voted-and-why/">polling has shown</a> that the majority of those supporting Brexit fall into the older demographic, generally citing ideological reasons rather than economic ones. The particular danger that business figures such as Dyson face when championing Brexit as an ideology, is that their economic situation will come under scrutiny. This in turn may strengthen perceptions that any economic changes to the country will not personally affect them or their quality of life.<br>
As a result, any comments they give on the state of the economy, such as <a href="https://www.theguardian.com/technology/2018/mar/01/dyson-hoovers-up-801m-profit-in-asian-spending-boom">Sir James’s</a> “hope (that the UK economy) will bounce back” in February 2018, can come across as quite glib.</p>
<p>That said, criticism on social media probably means very little to Dyson as a company, which continues to enjoy unrivalled success in the UK and overseas. But this episode shows that business figures (particularly those expressing strong views on Brexit) need to be aware of how much more examination their comments and decisions will attract.</p><img src="https://counter.theconversation.com/content/110461/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Gavin Midgley does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Its billionaire boss was a strong supporter of exiting the EU. Now the company is moving its headquarters out of Britain, too.Gavin Midgley, Senior Teaching Fellow in Accounting, University of SouthamptonLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1074702018-11-30T10:41:07Z2018-11-30T10:41:07ZRetail decline, in maps: England and Wales lose 43m square metres of shop space<figure><img src="https://images.theconversation.com/files/248109/original/file-20181130-194932-1qcw3f5.jpg?ixlib=rb-1.1.0&rect=179%2C196%2C5515%2C3594&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Store closures in Swansea. </span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/swansea-uk-june-19-2016-british-685936303?src=GLYSdddTUAdgCf_rLq8dmQ-1-72">jax10289/Shutterstock.</a></span></figcaption></figure><p>Across the UK, <a href="https://www.bbc.co.uk/news/business-43240996">retailers are struggling to survive</a>. This is down to several factors: years of austerity and low wage growth has meant that households have less spending power, the cost of imported goods has risen – as has the national minimum wage – and the trend of “bricks to clicks” means more consumers are shopping online, from the convenience of their home, than in store. </p>
<p>This is not just bad news for retailers. Empty shop fronts blight the high street in towns and cities across country. Research I conducted, together with the <a href="http://r3intelligence.co.uk/">R3intelligence</a> team at Northumbria University, found that retail is in decline across most of England and Wales, with just a few areas bucking the trend. </p>
<p>By comparing the government’s own data on business rates – based on values from 2008 to 2015, and made available in the 2010 and 2017 rating lists – we have been able to analyse changes in the number and value of retail properties across England and Wales over that period. The map below shows how <a href="https://www.gov.uk/introduction-to-business-rates/how-your-rates-are-calculated">the average “rateable” value</a> of retail floorspace – which is its estimated value on the open rental market – has changed in each local authority. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/247711/original/file-20181128-32191-1afe718.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/247711/original/file-20181128-32191-1afe718.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/247711/original/file-20181128-32191-1afe718.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=848&fit=crop&dpr=1 600w, https://images.theconversation.com/files/247711/original/file-20181128-32191-1afe718.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=848&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/247711/original/file-20181128-32191-1afe718.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=848&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/247711/original/file-20181128-32191-1afe718.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1066&fit=crop&dpr=1 754w, https://images.theconversation.com/files/247711/original/file-20181128-32191-1afe718.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1066&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/247711/original/file-20181128-32191-1afe718.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1066&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Change to the average rateable value of retail floorspace from 2008 to 2015.</span>
<span class="attribution"><span class="source">Paul Greenhalgh</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>In the green areas, rateable values – and market rents – have increased. But most local authorities across England and Wales have experienced a decline in values. In fact, in two-thirds of local authorities (231 of 348), values fell by up to 20% between 2008 and 2015. South Wales in particular has experienced the most significant decrease in values where towns such as Swansea, Port Talbot and Bridgend are still reeling from the <a href="https://theconversation.com/the-british-steel-industry-beyond-repair-54617">decline of the steel industry</a>. </p>
<p>The exception to the general trend is central London, where the inner cluster of boroughs experienced large increases in value – aside from the City of London, where there’s relatively little retail floorspace. The highest increase was recorded in Westminster, where the average rateable value for retail premises grew by almost 80%; a few rural areas also experienced large increases, exaggerated due to the small aggregate retail floorspace. </p>
<h2>Shrinking shop space</h2>
<p>Even more shocking is the reduction in retail floorspace across the country between 2008 and 2015. In all but five local authorities in England and Wales, total retail floorspace shrank – in more than two-thirds of local authorities, floorspace shrank by over 20%. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/247712/original/file-20181128-32214-e62r0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/247712/original/file-20181128-32214-e62r0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/247712/original/file-20181128-32214-e62r0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=848&fit=crop&dpr=1 600w, https://images.theconversation.com/files/247712/original/file-20181128-32214-e62r0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=848&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/247712/original/file-20181128-32214-e62r0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=848&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/247712/original/file-20181128-32214-e62r0.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1066&fit=crop&dpr=1 754w, https://images.theconversation.com/files/247712/original/file-20181128-32214-e62r0.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1066&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/247712/original/file-20181128-32214-e62r0.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1066&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Change in retail floorspace from 2008 to 2015.</span>
<span class="attribution"><span class="source">Paul Greenhalgh.</span>, <span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>In 2008, there were more than 157m square metres of retail floorspace. By 2015, this had fallen to just under 114m square metres, which represents a reduction of 27.6%. Even in London, all but one borough experienced a decline in retail floorspace: Newham was the exception here, having reaped the benefits of Westfield’s Stratford City shopping centre which opened in time for the London 2012 Olympics. </p>
<p>The killer combination of falling values and reduced floorspace is illustrated in our third map, which reveals that 95% of local authorities (331 out of 348) recorded significant decreases in the total rateable value of all the retail premises in their area, over the seven-year period. This is important because the rateable value is the basis on which business rates are levied – the lower the value, the lower the tax revenue generated by local authorities. </p>
<h2>A sobering message</h2>
<p>The areas in dark orange present the most acute signs of distress in the retail sector. These aren’t only areas experiencing post-industrial decline, such as South Wales, Barrow in Furness, Bristol, Hull, Teesside and Tyneside – they also include local authorities across the English and Welsh shires. </p>
<p>Some central London boroughs have fared better, with Newham revealed to be the only area in England and Wales where total rateable values have increased by more than 40%. Retail spaces in Hackney, Tower Hamlets and Westminster also grew in value. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/247713/original/file-20181128-32191-ivv7hh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/247713/original/file-20181128-32191-ivv7hh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/247713/original/file-20181128-32191-ivv7hh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=848&fit=crop&dpr=1 600w, https://images.theconversation.com/files/247713/original/file-20181128-32191-ivv7hh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=848&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/247713/original/file-20181128-32191-ivv7hh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=848&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/247713/original/file-20181128-32191-ivv7hh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1066&fit=crop&dpr=1 754w, https://images.theconversation.com/files/247713/original/file-20181128-32191-ivv7hh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1066&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/247713/original/file-20181128-32191-ivv7hh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1066&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Change in total rateable value from 2008 to 2015.</span>
<span class="attribution"><span class="source">Paul Greenhalgh.</span>, <span class="license">Author provided</span></span>
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<p>Our analysis delivers a sobering message: across most of England and Wales, the revenue generated from business rates on retail properties has diminished significantly. Local authorities in England and Wales – hit by <a href="https://www.independent.co.uk/news/business/news/local-councils-finances-budget-cuts-austerity-services-national-audit-office-a8242556.html">significant funding cuts</a> during austerity – are increasingly exposed to the vagaries of commercial real estate markets, since they now depend more on income from business rates to pay for local services. </p>
<p>There are a few success stories, one being the apparent renaissance of retailing in Corby in the East Midlands. The town is one of only a few areas outside central London to record an increase in both retail floorspace and value between 2008 and 2015, in part due to the success of the Willow Place shopping centre in the centre of the former steel town. For the most part, though, the outlook for retail across much of the UK remains bleak.</p><img src="https://counter.theconversation.com/content/107470/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Paul Michael Greenhalgh is a Member of the Royal Institution of Chartered Surveyors. </span></em></p>It’s not just affecting areas in post-industrial decline – retail spaces are closing and losing value across England and Wales.Paul Michael Greenhalgh, Professor of Real Estate and Regeneration, Northumbria University, NewcastleLicensed as Creative Commons – attribution, no derivatives.