As a few media outlets have noticed, the New Year’s Message from Enver Hoxha, then dictator of Albania, delivered in 1967, still seems to have some resonance almost a half-a-century later on.
“This year will be harder than last year. On the other hand, it will be easier than next year.”
It is against that profound pessimism (and the uncertainty of a UK general election) that the poor CFO has to approach their toil in the twelve months ahead. Yet, actually, as far as this country and our times are concerned, Hoxha may well have got it precisely wrong. This year may be much easier than last year and next year might prove to be more comfortable than the one that lies ahead.
Is this optimism as opium? No, it is to focus of a set of fundamentals that we should never forget.
The United Kingdom is a remarkable place really. It is hardly big, constituting 0.048% of the Earth’s surface. It might feel crowded but contains just 0.851% of the World’s population. It must, though, punch above its weight because it is responsible for 3.331% of global gross domestic product.
Now, 3.331%, although proportionately quite impressive, might not sound that overwhelming. What does it equate to? The sixth largest economy in the world to start with (India, which has more than 20 times as many people has just popped in to fifth place). The second largest economy in Europe. And the second largest, repeat second largest, exporter of services internationally. Not bad.
Much of this is due to (or reflected in) the colossus that is our capital city. London is the largest urban economy in Europe and strikingly more sizable than the only two cities which have a claim to be in this continent and contain more people within them (Istanbul and Moscow). It ranks second in the Global Finance Centres Index (after New York). For comparison, Paris stands 10th, Frankfurt sits 18th and Milan comes in at 45th in the running order.
Even this does not capture London’s economic clout sufficiently. If you were to drop a line on a map from a little bit past the very western edge of Kensington and Chelsea to the most eastern section of Canary Wharf, it would be, more or less, ten miles long. If you were to then go up and down from that line one mile north and south, then you would have a “box” on your chart of 20 square miles (or 51.8 sq km if you prefer). More capital is controlled within than box than in the remaining 3.93 million square miles (or 10,180 million sq km) of the rest of what is conventionally deemed Europe.
London has been one of the three largest financial centres in the world since the year 1500 AD. The idea that Brexit (whatever else you might think of it) would destroy that status overnight was crazy. Nor is there any evidence that the city is retreating. New York is at more risk of that.
All of which may explain why our business community has been so resilient despite a pandemic, a major war on the continent and seven weeks of Liz Truss as Prime Minister. There are, at the last estimate, 5,500,000 registered companies in the United Kingdom. This compares with 3.5 million in 2003. That is one for every ten adults (the most outstanding such ratio in the G7). Just over two hundred years after he initially said it, Napoleon has been proved right, the British are, in a sense, “a nation of shopkeepers” if shopkeeping is to be defined as representing entrepreneurship writ large.
These figures have a very particular relevance to private equity. More than 75,000 of these firms have between 20 and 49 employees (a lower mid-market sweet spot). About 35,000 of them have 50-249 employees (a tempting area for larger mid-market houses). Opportunity is not in short supply.
All very well, the retort might come, but Britain doesn’t actually make anything anymore. We have sold our soul to services. The nation that spawned the Industrial Revolution no longer loves industry.
We could and should probably love manufacturing more. We have, however, just risen to eighth in the world manufacturing league table (so much for relentless and remorseless decline). We have the second largest aerospace industry in the world, an extremely effective automobile industry and the second and seventh biggest pharmaceutical companies globally are based within our shores.
What explains the vitality of Britain, exactly a century after the Empire peaked and then receded?
There are, it can be asserted, three in part interconnected factors operating in UK Plc in 2024.
The first is higher education. The UK is very, very adept at it. According to the latest QS World University Rankings, four of the top ten universities on the planet sit on our soil (five are in the United States and one is located in Switzerland). Digging deeper, we have 17 of the top ranked 100 universities in the world (France has four, Germany has four and Italy zero). Higher education is estimated to contribute £130 billion to the UK economy. If it is thought of as an export it would be second after financial services. It is a goldmine with an academic gown wrapped around it.
The second is our (often understated) standing in science and technology. The UK has produced the second largest number of Nobel Prize winners in science and medicine after the United States. We sit today third in the world for published scientific research (after the US and China). We are robustly in situ as the second most important centre globally for medical research. We are Test Tube Titans!
Technology is no less striking. The UK technology sector is valued at $1 trillion. This is more than double that of Germany, in excess of triple that of France, more than four times that of Italy. It is the third most substantial in the world (after the US and China). Even in more challenging times of late, our venture capital industry easily raises and deploys more money than any European competitor.
The final aspect is the most intangible and most invisible. It allows the UK to make the most of its more subtle advantages, those of language, time zone (which helpfully starts in Greenwich), the English common law tradition, being a permanent member of the UB Security Council, a unique relationship with the United States (which will survive, if it has to, even a Trump II presidency), the Commonwealth and being a major source of and recipient of foreign direct investment.
It is that the UK is a cultural superpower and hence a “soft power” supremo. We are a massive force in the areas of film, literature, music, theatre and sport. Which institutions have a real global reach: Liverpool FC and Manchester United or the Boston Red Sox and the Kansas City Chief’s? Which is the more familiar venue, Wimbledon or Flushing Meadow? Who invented the most Olympic events? The Union Jack (Union Flag for purists) is of an idiosyncratic design, but it has a ubiquitous quality to it. Which other nation with such persistently appalling weather could be such a magnet to tourists?
So, start the year in a bright spirit about Britain. Ask yourself which other country would have given the world William Shakespeare, The Beatles and Monty Python? Not, one would politely conclude, Albania under Enver Hoxha. Here’s to a productive, profitable and purposeful 2024 for business.