The future of British Capitalism is hanging in the balance and it could be politicians that decide its fate. The story of British Capitalism is a long one. In its most recent chapters, we’ve seen the decline of industrial Britain in the post-war decades, the impact of globalisation and the emergence of London as a global financial centre. More recently we’ve had the financial crisis and, of course, Brexit.
Throughout these milestones, the national debate about what British Capitalism looks like has been severely lacking. Yes, there have been plenty of commentators willing to say what is wrong with it, but very few to say what is right and, more importantly, what it could be. Or that was the case until now.
As the blanket pandemic coverage subsides, space has emerged to debate what the British model of capitalism could and should be.
And at the heart of this debate is the London Stock Exchange. Although the flaws of using the stock exchange as a proxy for British Capitalism are all too apparent, the debate currently surrounding UK listed companies is one that goes to the very heart of what it means to do business in Britain.
Earlier this year, a government-commissioned review called for an overhaul of UK listing rules to make the UK more appealing to tech entrepreneurs.
Jonathan Hill’s review recommended the introduction of dual-class share ownership and reducing the amount of equity the company must make available. In recent days, the FCA has said it will open a consultation that seeks feedback on “removing other barriers to companies listing.”
The need for reform is clear. In an interview with the Financial Times this week, James Anderson, a prominent British fund manager, described the FTSE100 as a “19th century and not even a 20th century index,” pointing to the lack of innovative and fast-growing businesses within it.
Changes to listing rules to entice more tech businesses is one way to fix the “deep sickness” in UK capital markets that Anderson highlights, but increasingly another view of what Corporate Britain could look like is emerging.
Ed Miliband, the former leader of the Labour Party and current Shadow Business Secretary, believes rewriting UK company law to make businesses accountable to society and not just their shareholders is key to the future of British Capitalism.
In his latest book, Go Big: How To Fix Our World, Miliband presents a vision of a British model for stakeholder capitalism, similar to the B-Corp trend in the US.
Part of Miliband’s objective will be to amend the UK Companies Act which enshrines in law a company’s duty to act in the best interests of its shareholders and to instead focus more broadly on the benefits produced for society and the environment.
Miliband’s proposed reforms come at a time when ESG, climate change and sustainable capitalism are at the forefront of investor and consumer decision making, and he has some notable business leaders on his side through the Better Business Act Campaign. Although the changes go beyond the scope of just listed businesses, if successful, they could have a major impact on the UK’s listing regime for years to come.
And so the tussle for the future of British Capitalism has begun. The government’s view of a buccaneering, globally-minded nation of tech entrepreneurs could of course co-exist with the opposition’s appetite for a more responsible way of doing businesses, but which model will win out? The answer to that question will define British politics, society and, of course, the economy for years to come.