Britain is burning – but Labour thinks investors haven’t noticed
Matthew Lynn
5 min read
'The new Government needs to get a grip, and fast, and make sure the streets are secure from thugs and troublemakers' - Behlul Cetinkaya/Anadolu via Getty Images
The riots won’t make any difference, according to António Simões, the head of the city giant L&G. Global money will still pour into the UK.
Meanwhile, the Government is pressing ahead with its first “International Investment Summit” scheduled for the middle of October, just ahead of the Budget. Chancellor Rachel Reeves and Prime Minister Sir Keir Starmer are placing a big bet that their emphasis on “stability”, with the “grown-ups” back in charge, will bring global corporations back into the UK and boost growth.
But hold on. Who are they kidding?
In reality the image we are projecting to the world, of rioting, an epidemic of shoplifting, expropriation of assets and punitive taxes, could deter many from investing here. The one thing investors care about most are property rights – and they are not secure in Labour’s lawless, high-tax Britain. The likes of Simões could be wide of the mark if the big money begins to avoid the UK.
It is at least an optimistic view. Asked about whether the riots that have played out across the streets of the UK over the last week would deter investors from the UK, Simões argued that was unlikely.
“I don’t see that,” he said. “Most investors invest based on the fundamentals of the economy. There is a pent-up demand for investment in the UK, and having political and fiscal stability is really important”.
That will be music to the ears of Starmer and Reeves. The Treasury announced this week that the first major corporations have been signed up for the “Investment Summit” we are holding in October.
Modelled on the glittering events hosted by France’s President Emmanuel Macron at Versailles, although probably not quite as glamorous and without the same magnificent food and wine, the new administration is planning to host more than 300 “industry leaders” and to sell them their message that restoring “stability” will make the UK one of the best places to invest again.
Macron has wooed the likes of Elon Musk at his 'Choose France' summits - Ludovic Marin/Pool via REUTERS
It is a core part of their strategy. Taxes might be going up, and labour regulations becoming more burdensome, but a wave of inward investment will help lift growth, one of Labour’s key pledges.
The trouble is, the events of the last week have made that seem unlikely. For the last few days, the images from many of the UK’s major cities have been of burning cars, looted shops, and our police struggling to impose order.
The Prime Minister has been drawn into a public row with Elon Musk, the owner of X, about the causes of the riots, and referencing clampdowns on social media.
Certainly, most of us in the UK were fortunately not directly impacted by the social unrest. Even so it slightly undermined Labour’s promise of an end to the “chaos”.
That comes against a backdrop of rising lawlessness. We have seen a huge increase in shoplifting over the last few years, with many major chains having to put alcohol and even meat behind locked cabinets to stop it being stolen, and shopkeepers complaining that theft has now turned into a major cost.
The Government’s decision to empty out the jails is hardly going to fix that, nor is there any sign that it is willing to get a grip on the policing of minor crime, no matter how many costs it imposes on businesses as well as on society.
What is more, the Starmer administration is intent on extracting as much money from businesses and investors as possible. We have seen that in a whole series of ways.
A “black hole” has mysteriously appeared in government finances, despite pre-election assurances from Labour that they had “seen the books”. They are laying the groundwork for tax rises in the autumn, many of which will fall on businesses.
Windfall taxes are imposed with gleeful enthusiasm on any company that miraculously manages to make a profit that some minister deems “excessive”.
Pension funds will be told to invest in government-approved infrastructure, though asset managers ought to put their client’s money in stocks they think will deliver the best returns.
On top of that, there is surely now a risk the Government begins expropriating assets. Look at how it has taken the railways back into public ownership, the likely nationalisation of Thames Water, the war on landlords.
Consider the planning reforms pushed by Deputy Prime Minister Angela Rayner, with her determination to reduce the compensation paid to landowners, as well as dismissing their rights as irrelevant.
Nothing matters more to investors than the primacy of property rights. If you don’t own the asset you are building, and if you can’t earn the income that it will hopefully generate, then there is no point in putting your money in.
We may already be starting to see the impact of these measures. Sterling was the worst performing G10 currency over the last month according to Bloomberg, bringing its recovery in the run up to the election to a juddering halt. That is hardly a sign of a country the global money markets want to back.
The new Government needs to get a grip, and fast, and make sure the streets are secure from thugs and troublemakers. It needs to put an end to the epidemic of theft. And perhaps most of all it needs to make sure that investors are left to make their own decisions and earn a fair return on their money.
If that doesn’t happen, the ritzy summits and droning speeches about “stability” won’t make any difference. It can give up on foreign investment – and it can give up on growth as well.
