46 Wednesday December 22 2021 | the times
Business
Jan du Plessis, the former chairman of
BT, is the government’s choice to take
over as head of the Financial Reporting
Council.
The City watchdog has been without
a chairman since Keith Skeoch, the
former boss of Standard Life Aberdeen,
stepped down two months ago. Skeoch
had been appointed on a temporary
basis after being drafted in to replace
Simon Dingemans, who resigned in
May 2020 after eight months in the job
strong oversight of UK plc,” Kwarteng
said. “Restoring public confidence in
audit and corporate governance will be
crucial to our recovery from the
pandemic.”
The FRC is responsible for regulating
auditors, accountants and actuaries
and sets Britain’s corporate governance
and stewardship codes.
Du Plessis quit as chairman of BT
this year after reports of a falling out
with Philip Jansen, the telecoms group’s
chief executive, which BT denied. The
South African previously chaired RioTinto, the Anglo-Australian mining
group, British American Tobacco, the
maker of Lucky Strike cigarettes, and
SABMiller, the brewer.
Before taking on his first chairman’s
role, du Plessis was for 16 years chief
financial officer of Richemont, the
Swiss luxury goods group that owns
Cartier and Dunhill. The City veteran
also has served on the boards of Lloyds
Banking Group and Marks & Spencer.
If his appointment is signed off by
MPs on the Commons’ business select
committee next year, du Plessis willbegin a four-year term as the FRC’s
chairman.
He would take over as the watchdog
is given more powers and is trans-
formed into the Audit, Reporting and
Governance Authority as part of a gov-
ernment overhaul of how the country’s
biggest companies are scrutinised.
In an advertisement posted in the
summer, the government confirmed
that the new FRC chairman would be
paid £125,000 for two and a half days a
week. Dingemans was paid £150,000
for three days’ work a week.Tom Howard
Former BT chairman chosen to plug gap at top of City regulator
and took a position at Carlyle, the
American private equity firm.
The absence of a permanent leader
from the regulator’s board for more
than 18 months has drawn sharp criti-
cism from some quarters of the busi-
ness world.
After an open competition, Kwasi
Kwarteng, the business secretary, has
made du Plessis, 67, his preferred
candidate to head of the FRC.
“With direct experience leading
some of the UK’s most prominent com-
panies, Jan is perfectly placed to ensureProductivity growth is the great
economic prize that, at least as far as
Britain is concerned, seems impossible
to grasp.
Having just reversed a century-long
trend of low productivity, the financial
crisis of 2008 crushed hopes that the
puzzle had been solved and growth has
eluded the UK ever since. Even after
coronavirus lockdowns levelled the
playing field, the country lags behind
the United States and its European
competitors. High levels of employ-
ment have had little effect.
Experts have ventured myriad
solutions, but could the answer be more
fundamental? Is motivation the prob-
lem?
According to Kitty Ussher, chief
economist at the Institute of Directors,
15 per cent of the 20,000 businesses it
represents do not have ambitions to
grow. “We find a substantial proportion
of members are very comfortable with
how things are going and would
probably say they are happy with the
level of business as it is,” she told the
Commons’ Treasury select committee,
which is investigating jobs, growth and
place to grow a business, but there is a
challenge for policymakers. She told
The Times: “If your aim is to keep
trading and to keep having the type of
lifestyle that you want by running your
own business — and there’s lots of verygood reasons to have that — how do
you get the attention of those types of
firms in order to make changes when
they’re not seeking to make changes in
a way that would drive productivity,
efficiency, innovation and so on intothe medium term?” Britain suffers from
a “long tail” of low productivity, with
productive companies that compete
against the best in the world in every
sector, as well as a large number of
poorer performers.
Gregory Thwaites, research director
at the Resolution Foundation think
tank, believes that businesses may be
more likely to get away with being un-
ambitious because of a lack of competi-
tion after Brexit. “In the past, if a British
company wanted to be unambitious, it
would have been easier for a Dutch or
Spanish one to come along and eat their
lunch,” he said. “Now it’s much harder
to trade with those countries and not
really that much easier to trade with
any others yet. If there is any kind of
latent lack of ambition in the UK eco-
nomy, Brexit is going to make it easier
for that to harm the economy.”
Bart van Ark, a professor of produc-
tivity studies at the University of Man-
chester, argues that a lack of ambition
among smaller firms should not signifi-
cantly affect productivity. His “bigger
concern is that we hear this issue of lack
of ambition more widely for firms that
have employees that grow”.
The problem with ambition could
stem from a lack of resources, such as
talent or tools for digital transforma-
tion. “I think it has a lot more to do with
the circumstances and the environ-
ments and the constraints that many
companies have to work in,” he said.
There are positive signs: companies
adapted to the post-pandemic environ-
ment by investing in new technology.
Investment in machinery and informa-
tion technology rose by more than 7 per
cent between the final quarter of 2019
and the second quarter of 2021.
Make UK, the manufacturers’ group,
has called for the government to focus
on increasing the pipeline of workers
with vocational training. Stephen Phip-
son, its chief executive, said: “We were
reliant on Bulgarian toolmakers and
that source has dried up. This means we
are even more reliant on our own
system generating the skills we need
and that’s what we need to fix.”A welder works in France, which along with the United States and Germany has
productivity levels about 17 per cent higher than those being achieved in BritainProductivity is a
puzzle, but do we
want to solve it?
productivity. “There’s nothing wrong
with that, in a sense. It’s great to have a
country where people can start a busi-
ness and have it provide the lifestyle
that they want to have, but I suspect
that the link is something intangible.
It’s about the level of ambition of the
people around the boardroom table.”
She added that policymakers needed
to understand this lack of ambition in a
minority of small businesses if they
hoped to drive cultural change. “I sus-
pect there’s something in there about
the level of ambition that is linked to
productivity and investment in innova-
tion in general,” she said.
Productivity measures output per
unit of work. At a business level, it
gauges the efficiency of a company’s
production process; on a national level,
it is a prime source of economic growth
and international competitiveness.
Output per hour worked fell by 1.2 per
cent in July to September and was
4.8 per cent down on a year earlier,
according to the latest figures from the
Office for National Statistics. Britain
fared better in the other key measure,
output per worker, which edged up by
0.5 per cent on the quarter, yet even
then this was 1.1 per cent lower than
pre-pandemic levels in 2019.
Germany, France and America have
productivity levels about 17 per cent
higher than the UK’s. Though all coun-
tries have had weaker productivity
growth since the financial crisis, the
slowdown here is more pronounced.
Ussher believes that the UK is a goodA lack of ambition may
lie behind Britain’s
moribund economic
growth, writes
Arthi Nachiappan
Public sector borrowing was higher
than expected last month as rising
inflation pushed up the cost of servicing
debt.
The government borrowed £17.4 bil-
lion in November, down by £4.9 billion
on a year earlier. It was the smallest
year-on-year fall recorded in this fiscal
year even though Britain entered the
second lockdown at the start of
November last year and the govern-
ment has ended the furlough scheme.
City analysts had expected borrow-
ing of £16 billion, while the Office for
Budget Responsibility had predicted
that it would be lower still at £14.2 bil-
lion. Nevertheless, the figures reflect
the economy’s continued recovery last
despite fears that Omicron, the new
coronavirus variant, could lead to a
tightening of restrictions.
Samuel Tombs, at Pantheon Macro-
economics, the consultancy, said: “We
expect GDP to rise by 0.6 per cent in the
fourth quarter and then to stagnate in
the first quarter, though this assumes
no businesses are forced to close; the
risks clearly are to the downside. WeHigher inflation forces up public borrowing
Arthi Nachiappan
Economics Correspondent
month, with VAT revenues up 16 per
cent and income tax rising by 13 per
cent. Borrowing is on track to exceed
the OBR’s forecast of £183 billion for the
year, despite a downward revision of
estimates in the first seven months of
this fiscal year to £118.6 billion from
£127.3 billion.
The sharp rise in retail prices infla-
tion since the summer led to a rise in
debt interest costs to £4.5 billion in
November, up from £4.1 billion a year
earlier. The figure outstripped OBR
forecasts of £2.8 billion.
Michal Stelmach, senior economist
at KPMG UK, said that interest rate
decisions made by the Bank of England
would feed into public sector finances
next year. “Unlike during previous
recoveries, monetary policy will have
large fiscal implications as the Bankprepares to withdraw its stimulus,” he
said. “Around a half of total public debt
is linked to either inflation or the Bank
of England’s interest rate via [quantita-
tive easing], both of which will put
further upward pressure on servicing
costs. Taken together with three fur-
ther rate hikes that we expect by the
end of 2022-23, they could add as much
as £11 billion to borrowing that year,
eating up over a half of the chancellor’s
current fiscal headroom.”
Public sector net debt reached
96.1 per cent of GDP, its highest level
since March 1963. Experts predicted
that the trend in public sector borrow-
ing would deteriorate significantly as
the impact of a rapid surge in Covid
cases was felt by the economy.
The Bank raised interest rates for the
first time in three years last weeknow think that public borrowing will
equal about £190 billion this year, and
would revise up this forecast to around
£192 billion if the government re-
imposed for one month the rules seen
during step two of the unlocking earlier
this year and set up a furlough scheme.”
Government departments spent
£32 billion on goods and services last
month, £2.1 billion more than in the
same period last year and in part
because of spending on the booster jab
programme.
Forecasts will be affected by a tight-
ening of Covid restrictions in the near
future, according to Bethany Beckett, at
Capital Economics. “Although the eco-
nomy has got better at coping with res-
trictions with each new wave, we still
suspect it would prompt a deterioration
in the public finances,” she said.ARTUR WIDAK/NURPHOTO/GETTY IMAGESHistoric highs
Public borrowing as a percentage of GDP1900 1920 1940 1960 1980 2000 2020-505101520WW1 WW2 25%Source: ONS