6 days ago
Opinion: Labour's tax trauma for growth
By
Trade deals are flooding through the White House pipeline, with US-Japan done and rising optimism on a European accord. In Britain, Keir Starmer will be reannouncing his deal with India. It should eventually be good for whisky and car exports, but hackles will be raised by national insurance-free short-term contracts for Indian staff in the UK. The biggest lacuna is the failure of Starmer to secure binding accords on better access for Britain's financial and professional services, the UK's most successful export.
Despite Rachel Reeves ' Mansion House musings of last week, the Square Mile is unhappy and concerned. Lloyds Bank boss Charlie Nunn warned against further taxes on the financial sector in the Budget. Lloyds' profit bonanza of £2billion in the second quarter of the year will have the Deputy Prime Minister Angela Rayner, who has proposed an additional banking levy, straining at the leash.
The danger of further attacks on the City and wealth was highlighted by Goldman Sachs chairman David Solomon this week. All that stands between the UK's flatlining economy and recession is the services sector, which softened sharply in July. The S&P purchasing managers' index, among the most reliable forward indicators, sits at a two-month low at 51, barely above the tipping point into recession. The damage to confidence from a summer of speculation about taxation will be considerable.
Missing in action
There is a puzzling disconnect between Britain's overall economic performance and that of some of our better-run companies. The Prime Minister likes to rattle on about the UK becoming an AI champion with little recognition that in £72billion Relx, the UK's seventh-largest listed company, we already have a champion user. Relx is not helped very much by its well-remunerated chief executive Erik Engstrom who behaves like a hermit and has no public profile.
The bosses of public companies, like it not, have a responsibility to explain themselves to all stakeholders. In the case of Engstrom, the best to be expected is boilerplate about success and incomprehensible language which possibly, given its lack of insight, is AI-generated. Among his latest gems is talk of 'leveraging customer understanding to combine leading content and data sets with AI and other technologies'. What that means is anyone's guess.
What we do know is that revenues and underlying profit are accelerating and income from 'risk' – that means cyber protection – and legal data are the stars, and are up 9pc. It is terrific that Relx is doing so well and the FTSE 100 recognises that. Given Relx's expertise in deploying artificial intelligence and outperformance, any thoughts about relisting in New York should be extinguished immediately.
Changing channels
Carolyn McCall at ITV has one of the trickiest gigs in Britain. She runs a company at the heart of the UK's creative sector in a global industry dominated by behemoths such as Netflix and Sky owner Comcast. Under her, and in the face of some investors' scepticism about costs, ITV Studios has become a production powerhouse, supplying terrestrial rival the BBC as well as streaming services. Future growth is expected from Rivals season 2 for Disney, The Reluctant Traveler for Apple TV and Gomorrah for Sky.
ITVX, which was greeted by shareholders with outright disdain, but broke even two years ahead of expectation, expects £760million of income next year and has concluded a partnership deal with Disney. No longer is ITV's future as dependent on often volatile linear, terrestrial TV advertising. Despite all of this and a 13.3 per cent rise yesterday to 87.8p, the shares still languish. Time for a reality check.
