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Good morning. I need to kick the habit of making big claims about what I will or won’t tackle in a forthcoming note, because inevitably it gets superseded by a scoop. Today’s big one comes via Daniel Thomas, Anna Gross and Jim Pickard: Liz Truss is launching a last-ditch attempt to persuade Japan’s SoftBank to list the Cambridge-based tech company Arm Holdings here in the UK.
I have no idea if she’ll succeed, and in any case, City Bulletin by Cat Rutter Pooley is the newsletter you want for that (you can sign up here). But the story also reflects and reveals an awful lot about the UK’s new prime minister and her aims. Some thoughts on that below.
The one thing I can say for sure about my next note is that it will arrive on Tuesday. We’re off for the bank holiday: I’m thinking of checking out Center Parcs.
I’m begging of you please just list my Arm
Liz Truss is wooing Arm for a lot of reasons. It’s a reflection of the UK’s ability (or lack thereof) to resist and reverse the diminution of its listed tech sector. It would right some of the wrongs of Arm’s sale to SoftBank in the first place, which many UK politicians saw as a major mis-step in the UK’s attempts to protect and develop its own semiconductor industry. (Do give Andrew Hill’s in-depth analysis of all that a look if you haven’t already.)
But more importantly for the purposes of this newsletter, the new prime minister is really invested in showing businesses that her government is different to the ones that have gone before: particularly the two post-Brexit governments of Theresa May and Boris Johnson.
That’s not the only reason why Truss’s government is reviewing the government’s anti-obesity strategy, planning to scrap the bankers’ bonus cap, or indeed wooing SoftBank. A lot of it comes down to Truss’s personal politics: she has never liked the anti-obesity strategy and has a particular antipathy to its accompanying sin taxes. The only thing which appeals to her about the bankers’ bonus cap is that it hasn’t really worked.
But it’s not just about righting real or perceived old wrongs. Truss and her chancellor, Kwasi Kwarteng, want to signal to businesses in general, and the City of London in particular, that their days in the political cold are over. That’s part of the purpose of the government’s 2.5 per cent growth ‘target’, too: it’s all part of sending that same signal.
There are a couple of points to raise here. The first is as Chris Giles warns in his column, Truss and Kwarteng are taking big risks with the public finances and the results may be ugly.
The second — and this is an issue which preoccupies Truss’s inner circle — is the one that Helen Thomas makes in hers: which is that, sure, it’s great to scrap the bonus cap, a policy that wasn’t working, but it is comparatively thin gruel in terms of what the City needs and wants, and indeed what the UK economy needs and wants.
There are internal Tory party pressures here that can’t be wished away and are a limiting factor. There is a reason why Truss, and her defeated rival Rishi Sunak, felt they had to make ostentatious commitments to Conservative opponents of new housing. As Peter Foster explains in his Britain After Brexit newsletter, Truss is continuing to sound fairly maximalist on the Northern Ireland protocol (which has implications for our relationship with the EU and therefore for growth, too) in part because of where the internal politics of the Conservative party are.
And then there’s China. Daniel, Anna and Jim’s story has a good titbit on how the US government’s growing hostility towards China may have opened the door to a UK government victory over Arm’s listing:
A banker involved in the talks said that New York was “the obvious choice”, but added that the decision by the US government to block the export of advanced chips by rival Nvidia to China has caused additional scrutiny of the regulatory risks of the US.
The big unwritten story of the Conservative leadership election is that Sino-scepticism has become a major force within the party. It’s a big part of why Tom Tugendhat, a Remainer and critic of Boris Johnson, was able to pull in support from his party’s right as well as its left. And it’s a big part of why the likes of former Tory leader Iain Duncan Smith and indeed eventually Tugendhat himself rowed in behind Truss and not Sunak.
Truss’s hawkishness on China is a policy position which has implications for her government’s ability to present itself as an unashamed advocate for growth, just as the internal party pressures over the shape of Brexit and UK planning laws impose limits of their own, too.
Now try this
I’ve written about the most important of issues for the next edition of HTSI: boots! Also featuring a photo shoot with one of my more ostentatious suits.
However you spend it, have a lovely weekend.
Top stories today
Energy security bill on hold | Jacob Rees-Mogg, UK business secretary, will pause or even bin the government’s existing “energy security bill” in order to prioritise legislation to provide emergency support for businesses.
Shopping slump | Retail sales fell by more than expected in August as UK consumers struggled with soaring prices and high energy costs, heightening the risk of a recession.
Getting with the times | King Charles III intends to “slim down” the monarchy in response to public demand for a more modern institution with lower costs and less ostentation.
Risk and reward | Bank of England regulators and City executives have welcomed Kwasi Kwarteng’s proposal to end the cap on bankers’ bonuses. “In some respects there’s something rather brave and admirable about it,” former Treasury minister David Gauke said. “But it’s taking a big political risk.”
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