Matthew Lynn
With so many problems at home, it may have seemed that the very worst thing the Prime Minister Rishi Sunak could have done this week was fly off to Davos to spend the week sipping champagne with the world’s plutocrats.
But the UK needs to be sold to investors and corporate bosses, and Sunak has made a big play out of all the incentives for investment he is offering. Sure, Davos can be nauseating at times, but a British PM should still be there pitching the case for locating factories, warehouses and offices in the UK – because if he doesn’t do it, no one will.
It has been wrong about globalisation, about the pandemic, and indeed about almost everything. The themes of the World Economic Forum, which gathers in Davos every January, have become almost as reliable as covers of The Economist for getting everything completely upside down. The issues it says are vital turn out to be irrelevant, and the trends it ignores turn out to be important. Even worse, it has come to symbolise the kind of smug, complacent virtue-signalling that now passes for political leadership in most of the Western world.
The criticisms of the Davos talk-fest are all very familiar, and contain more than a grain of truth. Yet despite its repeated failure to identify anything of significance, Davos survives. In reality, what is said doesn’t matter very much. It is important because lots of very important people are there. Except, in this case the British Prime Minister. Sunak may have figured that as a very wealthy, public school educated former banker, he may already look a little too like the identikit Davos man. Catching up with lots of former college and work friends may have made him look like part of an out-of-touch elite. And of course, there are multiple challenges back at home that require his attention. Even so, he should have gone.
First, the UK badly needs investment. Davos may not have attracted so many major global leaders as in the past, with President Biden giving it a miss this year. It remains, however, a major draw for corporate and financial heavyweights, with the likes of JP Morgan’s Jamie Dimon, OpenAI’s Sam Altman, Pfizer’s Albert Bourla, and Microsoft’s Satya Nadella all in attendance, along with hundreds of others.
The Prime Minister has made a huge play of his policy of “full expensing”, a generous tax break that allows companies to set off the full cost of investment against the new higher corporate tax rate of 25pc. It is one of the most generous tax policies in the world, so long as you are a big company with lots of plans for new factories and research centres, and might well drive down the effective tax rate to just a few percentage points.
And yet, so far we haven’t noticed the rush of new projects announced for the UK. The global business community has not really noticed yet. It needs to be sold, and the most effective person to do that would be its main champion, the Prime Minister, and there would have been no better place than at the bars and conference rooms of Davos. Second, the UK still needs to explain the benefits of Brexit. The level of negativity around the UK’s departure from the European Union remains extraordinarily high among the global business elite.
There may not be much evidence that it has harmed us one way or the other – after all, we are growing faster than Germany and at roughly the same rate as France – but the perception is that Britain has been turned into a shivering basket case. It needs someone to explain that Britain is still trading successfully with the rest of Europe – indeed, oddly, the percentage of our trade with the EU has risen over the last couple of years – while also opening up free trade deals with countries in the Pacific, and perhaps soon with India as well.
Add in some modest loosening of the regulatory load, and there is a positive story to be told. But no one is making it right now, and the Prime Minister is the only person who can make a convincing case for what the post-Brexit British economy will look like. Finally, he is leaving the stage to everyone else. France’s President Macron was at Davos, of course, and so was the Spanish Prime Minister Pedro Sánchez, along with dozens of other global leaders. These are the UK’s real competitors for investment, and while they were no doubt working the corridors to pitch for fresh investment the UK was nowhere to be seen.
The shadow chancellor Rachel Reeves was also there, telling everyone who would listen that Labour was now the party of business. While that claim may be slightly implausible, to put it mildly, busy executives will have been impressed by the charm offensive. Other people will be filling the space Sunak has left empty, and that will damage the UK. Heck, the Prime Minister might even have enjoyed himself for a few days, something that does not seem very likely at Westminster. He could have listened to the Argentinian President Javier Milei’s brilliant speech explaining free market, libertarian economics, and possibly learned a thing or two. And of course he might have been able to pick up a few contacts for his next gig as finance director of one of the tech giants in California.
Davos, for all its faults, remains the best networking event in the world. The Prime Minister should be able to find 48 hours in his schedule to shake a few hands, and work a couple of rooms – and Sunak made a big mistake by skipping it this year.
The Telegraph
