Natwest chair: Boost investment or risk ‘inter-generational crisis’

The chair of Natwest has warned the UK is in a “moment of national crisis” that can only be fixed by firing up investment in the country’s flagging economy.

Rick Haythornthwaite, the City grandee who has also chaired the boards of Mastercard and Ocado, told City AM that years of political instability and poor decision-making have hampered public and private sector investment and kneecapped Britain’s growth prospects.

“Where we’re headed right now is into a very, very difficult national debt situation, into an inter-generational crisis and to lives on the street that are increasingly difficult,” he said. “These are all things that need to be confronted now.”

Haythornthwaite made the intervention to mark the launch of a fresh report from the 2030 Prosperity Alliance sounding the alarm on the chronic underinvestment in the UK economy. ‘Neglect’ – the first in a five-part series of papers taking on “giants that stand in the way of economic growth” – warns that over the past three decades the average G7 economy has invested £2 trillion more than the UK.

The alliance is led by Haythornthwaite and boasts the chairs of Diageo, National Grid, Barratt Redrow and Reckitt as members. In Neglect, it singled out the “thicket of rules and regulation” and a national aversion to risk as responsible for the dearth of animal spirits in the UK.

It added that inconsistent political messages and the proliferation of watchdogs and legal process also needed to be “slayed” if the UK wants to match the dynamism of other major economies.

Britain’s £2 trillion investment gap

Authors estimated that even if investment levels in the UK rose by four per cent a year, it would take a century for the country to close the £2 trillion ‘investment gap‘ between it and peers like the US, France and Japan.

The paper was unveiled just weeks before John Healey delivers his maiden Budget against a bleak fiscal and monetary backdrop. Growth has outstripped expectations for much of this year, but the re-escalation of the Middle East conflict and persistently high government borrowing has left the Chancellor hemmed in by his self-imposed spending rules.

At the speech – slated for 28 October – Healey is expected to use a carve-out to those rules that allows greater borrowing for investment, the proceeds from which will be allocated to what are known as Public Financial Institutions (PuFins).

Haythornthwaite said the bodies, which include the British Business Bank and National Wealth Fund, could “undoubtedly play a role” to help bridge the investment gap. “They need to be clear in their mandates, they need to be very joined up in their thinking [and] they need more scale than they have right now,” he added.

But the City doyenne said the majority of investment must come from businesses if Britain is to make up the ground it has ceded to peers. A slew of recent macroeconomic shocks like the pandemic and the Iran war has caused firms across the UK to put investment plans on ice. But 2030 Prosperity Alliance’s paper – ring-led by former Institute of Fiscal Studies chief Paul Johnson – found the lion’s share of issues deterring private sector investment to have come from self-inflicted issues like regulation and the country’s febrile politics.

“The private sector has to step up as well,” Haythornthwaite said, citing the fact British firms have historically invested more in branding and market research than research and development. “This is about business partnering with whatever government is of the day. But to do that, business has to be able to price the future. And if you’re pricing the future you need stability and predictability [which] is not something that has been enjoyed in recent times.”