Ian McConnell: Populist Government with a Walter Mitty view of UK’s place: Opinion



WITH a populist Government firmly installed in the UK – an administration which has proved extremely determined in using patriotism to achieve its aims – it is no great surprise the country’s place in today’s world has been the subject of debate and division.

From a rational economic and business perspective, of course, it is always easy not to be swayed or have your head turned by political spin. The realities on the ground tell you the true story – whether politicians choose to hide from this or take it on board and deal with the facts. It is a simple matter of thinking for yourself and analysing what is occurring, an effort it sometimes seems too many people cannot be bothered with these days as they trot out their favoured politicians’ messages of the day, week, year, whatever. And, whether Minister for the Cabinet Office Michael Gove likes it or not, experts should be heeded.

In this context, an assessment of the challenges facing the UK right now, from the managers of the £812 million Scottish American Investment Company (Saints), should make sobering reading for the UK Government.

Saints’ managers, James Dow and Toby Ross of Edinburgh investment house Baillie Gifford, declared: “Most readers of this report live in the UK, and the start of 2021 has featured no shortage of gloomy headlines for this country. The realities of what a ‘hard’ Brexit might mean for trade of different kinds are colliding with an economy that is struggling to get back on its feet, while the number of people who have lost their lives to the coronavirus has been truly appalling. The great progress on vaccines gave equity markets a shot in the arm in November, which particularly helped the share prices of some of the most distressed businesses, such as banks and airlines. But despite this, pessimism is in the air.”

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It is a very different perspective on the UK’s situation to that currently being put forward so relentlessly by the Johnson Government, which too often seems so long on British exceptionalism and lamentably short on delivery. However, it is a summation of the sad reality of the situation.

The death toll from Covid-19 coronavirus in the UK has been appalling. The economy is most definitely struggling to get back on its feet. And, yes, the UK did opt for a “hard” Brexit, something which is exacerbating its woes greatly at the worst of times and will continue to do so.

It seems that too often in the UK since the onset of the pandemic there has from some quarters been a total lack of recognition that it is controlling coronavirus which is actually crucial in minimising the economic damage.

The success of the likes of Taiwan and New Zealand in this regard show the real picture.

Thankfully, vaccine success has given the UK and other countries around the world which have struggled so badly to bring coronavirus under control a way out of this awful mess. However, the route out is still protracted, and it is crucial to realise that impatience, which at times seems to arise from an inability or unwillingness to comprehend the situation, and general short-termism will be counter-productive on the road ahead.


Prime Minister Boris Johnson urging people to get back into offices in late August last year still stands out as a striking example of counter-productive impatience to get things back to normal.

The nature of the pandemic must always be taken into account in formulating the best road ahead, and we should remember the priority must be continuing to save many thousands of lives, while remaining acutely aware of the need to support businesses, households and the economy until things return to a more normal footing.

Returning to Saints and its global perspective, the view of the investment trust’s managers on opportunities in the UK stock market relative to those in equity markets in other countries should also ring an alarm bell for the Conservative Government.

Boris Johnson Picture: PA


Any alarm bell is of course unlikely to be heard because this is a noisy Government that seems to put rambunctious patriotism first and prioritises soundbites over reality when it comes to discussing the UK’s position on the global stage. Too often, it seems to hark back to days of Empire, either not realising or choosing to ignore the obvious reality that the world is nothing like that these days.

Mr Dow and Mr Ross flagged the success of portfolio holding Taiwan Semiconductor Manufacturing Company, as well as Saints’ investments in Australian car listings business Carsales and Chinese gaming company NetEase.

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They declared: “Our main reflection from 2020…has been the huge benefit of our investment approach taking a global perspective, and the freedom to invest wherever the genuine opportunities are.”

Mr Dow and Mr Ross added: “As we noted earlier, the pandemic has been particularly brutal in the UK and Western Europe – but many of our businesses in Asia are back on their feet and trading more strongly than before the pandemic. Indeed, TSMC has just announced a 50 [per cent to]60% increase in investment, because it sees such strong demand for its next generation of semiconductors. Not being restricted to the narrower opportunity set of the UK market has therefore been an enormous advantage – and we think it will continue to be one for the coming years, as it allows us to get exposure to businesses like TSMC, or NetEase, or Carsales: companies which we think do not just have business models which are well-suited to Saints’ aims, but which are also seeing an expanding opportunity set.”

Baillie Gifford partner James Anderson, joint manager of the giant Scottish Mortgage Investment Trust, has long been downbeat on the scale of opportunities in the UK stock market.

Mr Anderson has also touched on the UK’s “inability” to recognise where power has lain in its relationship with the European Union.

Asked in June last year, in an interview with The , how he believed Brexit would develop and whether he thought a trade deal would ultimately be agreed between the UK and EU, Mr Anderson replied: “I am quite pessimistic as I still think we are approaching it with a fairly great degree of arrogance and an inability to recognise where power lies in this relationship.”

However, reiterating Scottish Mortgage’s very small exposure to the UK stock market, he said then: “Our policy isn’t determined by that. We have such little exposure to Britain. It is not a big issue for us.”

With how everything has developed, and where we are now, Mr Anderson’s reflections on the UK Government’s perceptions in relation to the country’s place on the international stage remain very worthy of note.

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Scottish Mortgage’s exposure to the UK stock market has reduced dramatically in recent years. UK equities accounted for just 1.7% of total assets at March 31, 2020, down from 46.1% 15 years earlier.

Mr Anderson told The last June: “I am probably more pessimistic now than I have been about the British stock market’s ability to throw up companies that are able to participate in this extraordinary pace of change.”

The fund manager declared: “I think it is quite surprising to be honest. I think in a way that has got worse.”

And, referring to the chief executive of US-based electric vehicle, energy storage systems and solar power pioneer Tesla, he added: “I don’t see an Elon Musk around, do you?”

Mr Anderson has reflected on possible reasons for the challenges the UK faces on this front.

Elon Musk Picture: PA


In 2019, looking back to the Margaret Thatcher government, Mr Anderson told The : “This seems to be one of the hidden questions in British politics, that you are not allowed to talk about.

“We had a government that was in favour of entrepreneurial capitalism but [we]don’t seem to have any entrepreneurial capitalists.”

The UK economy undoubtedly faces massive economic challenges, not only in the immediate future as it attempts to recover from the effects of the coronavirus pandemic but over the years and decades ahead. For now, the Johnson Government would do well to reflect on the issues raised by the Baillie Gifford fund managers, and of course by many other experts who cut through the political spin with incisive analysis based on real-world events.

The challenges ahead are huge, and some optimism might be useful, in situations where it is grounded in reality.

However, the Walter Mitty-type view of the world from Mr Johnson and his Cabinet will make things a lot worse, certainly not better, and we are already in a very difficult place, in no small part because of decisions made by this UK Government.


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