Jim O’Neill is not a man to waste his words. Former Goldman Sachs chief economist and former adviser to two prime ministers says the Tory party is running out of time to win the hearts of voters in the north of England.
Those who switched in the latest Labor elections are still waiting for evidence that the regions’ economic ‘levelling’ was not just an empty promise.
Just 11 days before Chancellor Jeremy Hunt makes one of the most pivotal budget statements in decades, he says: “This is the last chance for the Red Wall vote. If the Conservatives get it wrong, it’s too late and a gift to the Labor Party.’
Northern soul: Lord O’Neill’s investment vehicle Northern Gritstone has £215m to invest in Northern companies
Lord O’Neill is arguably more qualified to make that judgment than many. The fanatic Manchester United – he even once tried to buy the club with a consortium of investors – teamed up with David Cameron and Theresa May. He was one of the principal architects of the Northern Powerhouse – a body set up by the Tories to stimulate economic growth in the north.
More recently, he has set up an investment fund to support companies that could boost trade and create jobs in those same areas that are lagging behind London.
O’Neill admits Hunt is tied up as he wants to fill a £50bn gap in the country’s finances. But he says the new chancellor needs to make some investment promises to boost the heavily congested areas.
‘There has to be ambition, otherwise we will never get out of this low growth trap. More emphasis should be placed on skills and investment.
“The investment deduction should remain, while the government should make it easier for pension funds and insurers to invest in start-up funds and companies,” he says, referring to schemes such as the annual investment deduction that gives a tax credit for companies investing money in new factories and machines. .
Leveling was first used in the Conservative Party manifesto in 2019 and was a policy aimed at reducing imbalances across the country. But Covid and a series of self-inflicted Tory disasters have pushed policy on the agenda.
O’Neillis hopes the Tories can pull it out of the fire after the disaster caused by former Chancellor Kwasi Kwarteng’s budget in September, which sent Britain’s finances and bond markets into a slump.
“Never in my professional life have I seen anything like it. He announced unfunded tax cuts without forecasts from the Office for Budget Responsibility. It was frightening naivety.
“But the adults are back in the room and I’m impressed with Hunt. I hope he doesn’t disappoint me.’
So far, signals have been mixed from Prime Minister Rishi Sunak, who is publicly in favor of leveling but so far has not expressed his commitment to investment zones or the HS3 link between Leeds and Manchester.
This annoys O’Neill, whose top priority these days is to close the productivity gap between the North and the South. The 65-year-old believes one of the answers is to bring the cities of Manchester, Leeds, Sheffield and Liverpool together and become one economic zone.
He wants the area to become like the US West Coast, specifically San Francisco Bay, giving the UK much-needed growth at a time when the nation needs it so much.
O’Neill points out the unique geographic location of these four northern cities, explaining that they are only 80 miles apart at their furthest point. At the very least, Liverpool and Manchester should be a Dallas/Fort Worth-style metroplex. “If you look at the whole area, which radiates out around that part of the north, you have eight to nine million people.”
He admits there is a brain drain to London; he himself ‘a proud Mancunian’ is typical of this. But he says, ‘If you can create one economic market in that zone, it’s a different London. If you could do that, it would increase the UK’s national growth.’
Born in Gatley in the suburbs of Manchester, O’Neill is a passionate northerner who championed leveling long before it came into fashion.
He is best known as king of the acronym, having created Brics as chief economist at Goldman Sachs, putting Brazil, Russia, India and China on the map.
He has no air and grace, is in good physical shape and his conversation is littered with references to Manchester United. He spectacularly fell out with Theresa May in 2016 and resigned. “She liked the idea of doing more for difficult places, but was really against the Northern Powerhouse because it was George Osborne’s, which was kind of stupid.”
He rejects the way the Tories currently sell leveling to the public – ‘slogans, no real substance and depth’.
Because so little progress has been made in leveling the country, policies have become increasingly fickle, especially for conservative voters in the South.
O’Neill knows this and says: ‘It’s portrayed as all at London’s expense and the Mayor of London makes that fear public quite often. But this won’t hurt London.’
He is equally critical of Northern politicians who cannot match his ambition and have ‘the attitude of poor little me in the north, what about me in the north’.
O’Neill is fed up with the political classes and their inability to stimulate private investment to the north.
His latest project, Northern Gritstone, is an investment vehicle seeking support for companies from top northern universities that attract only a tiny fraction of the money that would otherwise go to the ‘golden triangle’ universities of Cambridge, Oxford and London goes.
Northern Gritstone is backed by many large pension and mutual funds, including M&G and Columbia Threadneedle. It has £215 million to invest and has already identified 140 potential opportunities. The group has supported three companies to date.
One of the investments is a company called Iceotope, which cools computer servers with liquids instead of fans. We are at the company’s headquarters in Orgreave, on the outskirts of Sheffield, the site where 40 years ago steelworkers violently clashed with police at the height of Margaret Thatcher’s crackdown on the miners’ strikes. O’Neill stares out the window at the vast open valley and says, ‘I brought Osborne here when he came to Sheffield. I said to him, “Do you know where this is?” I told him, he couldn’t believe it – his mouth dropped open.’
It is now a high-tech business park, with Iceotope as well as Rolls-Royce and McLaren located nearby.
In the presence of the company’s board, O’Neill is in full Goldman Sachs mode. As an Iceotope company director prepares to go through his 100 or so prepared slides, O’Neill quickly steps in — all he wants to know is how and when they’re going to make money and if he can see the product.
We are taken to the factory floor where the young engineers are hard at work. O’Neill really gets animated and their enthusiasm is wiped out – justifying him that his latest case is not in vain.
“I want Iceotope to employ hundreds of people in South Yorkshire who earn a very good income. That would be immensely satisfying to me and a real justification of what Gritstone stands for.”
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