Moulton offers more corporate wisdom

Britain must stop consuming more than it produces or the country faces continuing financial misery, one of the UK’s leading businessmen has warned.

Jon Moulton, chairman of Better Capital, made the plea during a talk on the subject of ‘Our Children’s Debts’ at Leeds University Business School’s Corporate Wisdom Lecture. The latest lecture, supported by law firm DLA Piper and Marketing Leeds, was attended by some of Yorkshire’s leading businesspeople.

Moulton, managing partner and founder of Alchemy Partners, said the UK is in trouble because we consume more than we produce, we are heavily in debt and our economy is growing too slowly. Referring to the UK’s £156bn annual budget deficit, Moulton drew comparisons between the UK’s current financial predicament and the parlous situation in the mid-1970s, when the UK had to seek a £2.3bn bail-out from the International Monetary Fund (IMF).

He said: “We can’t carry on what we are doing. We are the most heavily-leveraged nation on earth – this is not a proud boast. We have higher levels of debt and national deficit than when we went to the IMF. We are not safe – we are in a world where it could easily blow apart.”

Moulton said that a rebalancing of employment levels between the private and public sectors was needed, and claimed that having less people working for the state was essential to restore growth.

The best way to achieve this, he argued, could be for Government to make immediate, swingeing cuts to public sector spending, rather than a series of smaller, staged cuts over time.  He added that there is a strong moral – as well as financial - case for taking drastic steps now to restore the UK’s finances, specifically reducing levels of national and personal debt.

He said: “[Major up-front cuts] could be better than years of pain. As you get more [people working in the] public sector, your growth declines. The state has to become smaller. What we are doing is deeply immoral. We are living well today at the expense of our children and grandchildren.  We are leaving reduced growth, reduced prospects. Our willingness to take pain today has to be traded off against us borrowing from our kids - it’s very wrong.”

Moulton is well-known for his hard-hitting views and being unafraid to voice opinions which often challenge widely-held assumptions.  At Leeds University Business School’s Corporate Wisdom lecture in 2008, Moulton warned that Britain was facing a quite serious recession at a time when many believed the UK would avoid a slump.

Speaking at Corporate Wisdom last week, Moulton said there could be as many as 80,000 ‘zombie companies’ in Britain, which survive only because of low interest rates and their lenders’ unwillingness to call in loans they have made to them. Moulton questioned why UK company insolvencies were at a 30-year low when the country is still emerging from a recession.

He said: “We are propping up lots of hopeless companies, and probably a few deserving ones. There are probably 800,000 people propped up in businesses supported by the state.  In a free market economy, should people be allowed to work in companies that should go bust?

“This is part of what we do as a society - not take the pain, not take the reality. To defer, not recognise. At some point, we will see interest rates go up. You will see a lot of failures in the next few years.”

Moulton said the Budget announced by the recently-elected Conservative-Liberal Democrat coalition government, which included a proposed 40% cut in all Whitehall departments apart from the NHS and international development, was a “good start” to tackling the nation’s problems.

He said that the Treasury had “got the [the right] balance between tax raises and spending cuts” but warned the coalition would need “immense political courage” to push the cuts through.

Click here for the presentation slides from the 'Our Children's Debts' lecture by Jon Moulton