After the Truss-Kwarteng crash, a tentative welcome for Sunak

Let’s hope Tuesday’s partial eclipse of the sun was a good omen for the return of Rishi Sunak to Downing Street, this time as Prime Minister. Understandably, he looked more earnest than triumphant. Business leaders and financial markets gave him a positive welcome but – understandably also after months of turmoil, with huge challenges ahead – rather a tentative one. Ten-year gilt yields dropped from a panic-driven 4.5 per cent to a still worried 3.8 per cent, double their recent lows; the pound blipped up, then settled back to its recent benchmark of $1.13.

A ‘dullness dividend’ is what money men are hoping for, we’re told, after Johnson’s narcissistic inattention and the crackpot Truss-Kwarteng entr’acte. We know we’re heading for austerity and orthodoxy; we await the fiscal statement due on Halloween. Business, as I’ll elaborate in a moment, can cope with any shade of government so long as it’s clear in its direction and competent both in execution and in speaking the language markets understand. Sunak as chancellor scored high marks for competence; the financial community recognises him as one of their own. But the capriciousness of events, politics and global economic forces waits to knock him off course.

Feast of Fools

Another week of havoc before Sunak’s victory, another conference gig for me. As Westminster’s Feast of Fools was preparing to usher the Lord of Misrule back from his Caribbean idyll, I was at the Roundhouse offering an update on the political and business outlook to a gathering of hospitality chiefs. The rock-concert ambience was at odds with the palpable sense of apprehension among a crowd wondering what plague might hit them next as borrowing costs soared, consumers huddled, and energy bill relief fell into Chancellor Hunt’s bacon-slicer.

The only comfort I could offer was the idea that good business is the antidote to bad government. It can, of course, be the other way round: in 2008, bold state intervention was the only remedy to the damage wrought by bad banking. But more often, the mess made by politicians is countered by the quiet efforts of business leaders and entrepreneurs to pivot, innovate, preserve jobs where possible and, as Churchill put it, keep buggering on – with their eyes on a brighter horizon.

What’s more, I said, the coming downturn can be fertile for new ventures, because space and labour will be more readily available, competition will be weaker, investors will be eager for recovery plays – and failure will be no disgrace when the odds are so stacked against you.

‘How long before we’re on the other side of all this?’ was the first question from the floor. ‘I’d guess two years,’ I replied. ‘Will our sector get another VAT break this winter?’ was the second. ‘Dunno,’ I said, ‘But I’ll pass on your request.’ As for Downing Street’s next plot-twist, events had overtaken my predictions before I even left the stage.

The China problem

Speaking of conference stages, the sight of the former Chinese president Hu Jintao being manhandled out of the Communist Party congress in Beijing – probably never to be seen in public again and with barely a nod from his successor Xi Jinping – made me wish British politics would sometimes proceed by such decisive steps. Boris Johnson, for example, might be sent to exile on a sub-tropical island with no airport; Jacob Rees-Mogg to an icebound re-education camp

But wishful thinking apart, the week’s most significant coronation was not Sunak’s but the rubber-stamped five-year (and more likely lifelong) extension of Xi’s iron grip on China – and the clearing-out of the last pro-market reformers in his cardboard politburo. A sharp sell-off of Chinese stocks by inter-national investors told part of the story.

Faced with flagging growth, a property slump, the negative impact of his own zero-Covid policy and a high-tech trade war with the US, Xi’s response is harsher autocracy at home and more hostility abroad, notably towards Taiwan. The West’s most productive partner in globalisation has mutated into something much nastier and more dangerous. Our new government has plenty on its plate already, but the China problem is moving inexorably up the agenda.

Banking as usual

Two headlines this week suggested a return to one form of normality. First, from the FT: ‘Barclays challenges £50 million fine over “reckless” failure to disclose Qatar fees’ – another iteration of the controversy that never dies (despite the dismissal of related criminal charges) regarding the bank’s 2008 fundraising from Qatari investors who received ‘advisory fees’ of £322 million for their participation. Secondly, from the Independent: ‘Credit Suisse to pay $324 million to settle French tax fraud case’, which needs no explanation. Reminders that – though my larger theme this week is that business should be admired for creativity and resilience – in the world of high finance, mischief and misjudgment are also ever present.

Macho marketing genius

Finally, speaking of entrepreneurial creativity, I’ve never touched a drop of Red Bull, with or without vodka, but I offer a farewell salute to its Austrian inventor Dietrich Mateschitz, who has died aged 78. Taking as his model a caffeinated drink favoured by Thai truck drivers to keep themselves awake, this former toothpaste salesman perfected a product – laced with caffeine and taurine and associated by sports sponsorships with danger and speed – that sold 10 billion cans per year. In the pantheon of brand promoters, Mateschitz ranks not far behind Sir Richard Branson of Virgin. Even the name Red Bull was genius, hinting at raging machismo and simple enough never to need translation. That couldn’t be said of a potential rival chemical-packed ‘sports drink’ for which I developed a taste in Japan long ago but have never seen since: Pocari Sweat.