RUTH SUNDERLAND: UK plc brightens the mood
- As readers of these pages may have discerned, there is a positive story to tell
- UK is privileged to have a solid base of large firms with long histories
- We should pour energy into exciting new firms but value the golden oldies too
The weather has been wet, interest rates have gone up again and Chancellor Jeremy Hunt says the UK is caught in a low growth trap.
It’s easy to wallow in defeatism and gloom. But as readers of these City pages may have discerned, there is a much more positive story to tell.
Some of the UK’s biggest firms are in rude health, despite the dismal backdrop, as the recent crop of half year results has shown. Shares in Rolls-Royce are up nearly 140 per cent in the past 12 months thanks to signs of a revival under new boss Tufan Erginbilgic.
He is adamant that the bounceback is not merely a Covid recovery but is due to ‘self-help’ at a company that has not always been well-managed. The UK’s largest defence company BAE, a beneficiary of the war in Ukraine, is also in fine fettle.
This is excellent news for believers in ‘levelling up’, as the firm is a major employer and provider of apprenticeships in less-well off areas such as Barrow-in-Furness. Then we have the rise of Greggs, whose pies and sausage rolls have captivated the nation. It seems unstoppable. From its Geordie heartland, it has colonised the South and plans to have 3,000 stores by the end of 2027. Not bad going for a firm which I remember as a youngster in the North East for selling cheap, wonky bread loaves to grannies.
No roll call of corporate excellence would be complete without a mention of Next. Under Lord Wolfson it is one of the best-managed businesses in the land. Its sales for May to July were better than predicted. A satisfying moment of summer 2023 has been seeing pharmaceuticals giant AstraZeneca turn the tables on Pfizer, the US rival which tried to take it over in 2014.
AZ, now the UK’s most valuable company, is steaming ahead with strong sales of cancer and diabetes drugs. Chief executive Pascal Soriot thumbed his nose at Pfizer with a $1billion deal to buy its gene therapy assets.
There are common threads. One is simplicity. Greggs is an exemplar of doing things that are deceptively simple, really well. The observation that people want snacks later in the day has helped improve sales, as the group extended opening times at some stores.
Like most of the best ideas, it is obvious once someone has thought of it. Second is clarity. Wolfson at Next is known for his clear communication, which stands out in a swamp of verbosity. Firms that have a clear strategy, plainly expressed, are more likely to succeed than ones drowning in gobbledegook.
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Third, companies must be well run, and get the basics right, which is why Next performs. The prevalence of bad management elsewhere is shocking.
The UK is privileged to have a solid base of large firms with long histories. Rolls-Royce goes back to the Victorian era, as does the heritage of BAE, through firms it has absorbed such as the old Vickers shipbuilders.
Greggs was founded on Tyneside more than eighty years ago. The old ICI – in its pomp Britain’s bellwether business with its fingers in pharmaceuticals, chemicals, fertilisers and paint – lives on at Astra.
Some people on Teesside, where it was a major employer, still called the AZ Covid vaccine ‘the ICI jab’. Sustainability is now taken to mean green, but these companies are sustainable in the sense of longevity.
Yes, we should pour energy into exciting new firms but value the golden oldies too.
It need not be mutually exclusive. The late great Ivan Menezes was boss for a decade of drinks giant Diageo, where some brands date back to the 18th Century. Nevertheless, he described the multi-national as a ‘start-up’ because there are always so many new opportunities to conquer. That’s the spirit.
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