Any other business

Why can’t Britain hang on to its best new companies?

8 September 2018

9:00 AM

8 September 2018

9:00 AM

Costa, in my opinion, sells a decent cup of coffee. It employs polite youngsters who seem happy in their work. If you’re desperate for caffeine, even its petrol-station vending machines are not too bad. And unlike the UK operation of Starbucks, whose coffee is vile, it pays tax on its profits at close to the full rate of corporation tax. Founded by two Italian brothers in London’s Vauxhall Bridge Road in 1971, it’s a triumph of brand development — and a credit to its current owner Whitbread, which acquired Costa as a diversification from its own traditional brewing business in 1995. Now Costa has been sold to Coca-Cola for a handsome £3.9 billion: no wonder Whitbread chief Alison Brittain called the deal ‘absolutely stonking’.

But is there a downside? Having prospered selling nutritionally worthless beverages to the world’s poor, Coca-Cola is an authentic monster of capitalism — but has also been a benign owner of Innocent Drinks, the smoothie maker that was once a hip London start-up, and there’s no reason to expect it to damage the Costa format. More troubling is the point I’ve made before, that much as we’d like to boast of our native entrepreneurs building giant digital technology companies, they generally don’t: instead, they build and sell the likes of Costa, Innocent, Tyrrells Crisps, Dorset Cereals and the Pret A Manger and Eat sandwich chains. Kings of the snack economy we may be, but will that save our bacon?

Walking the plank

So farewell Paul Pester, the TSB chief executive who has finally walked the plank in the wake of the IT failures that afflicted his bank in April and reportedly have not gone away. Pester’s initial response to the fiasco — prickly, defensive, insensitive to customers’ woes — hit all the wrong notes. Even though much of the blame lies with TSB’s Spanish parent Banco Sabadell, which has been accused of insisting on the transfer of TSB accounts to its own computer platform without adequate preparation, Pester might have won some respect if he had said from the start ‘I’ll go as soon as this is fixed’, rather than so obviously trying to cling to his job. As for Sabadell, regulators should hold it under the fiercest scrutiny: if it continually leaves TSB customers in the lurch, is it a fit and proper owner for a UK bank?

Warning signals

I’ve been cheerleading for Crossrail ever since its then chairman Terry Morgan led me deep below Bond Street in 2013 to watch diggers clawing at a cliff-face of London clay. A stupendous and transformative feat of engineering was afoot; I was eager to believe it would be finished on time within its £14.8 billion budget, and I’d be whizzing across the capital on it by the end of this year. But chief executive Andrew Wolstenholme left in May to join BAE Systems and Morgan left in July to take command of HS2 just as a £600 million overrun of Crossrail costs, rumoured for months, was confirmed; and whenever I walked past the Bond Street site this summer I observed that work had slowed almost to a halt.

Sure enough, we now learn that the central section of the Elizabeth Line, to use its proper name, will not open until at least next autumn — with additional costs yet to be revealed. Just when we need affirmation that the UK is capable of delivering something more ambitious than an artfully decorated flat white coffee, we have a colossal infrastructure cock-up on our hands. Having stuck my neck out in support, I’m personally very upset about it.

But what went wrong? Crossrail’s first champion Lord Adonis blames transport Secretary Chris Grayling, not least for moving the veteran Morgan to HS2 when Crossrail most needed his skill as a fixer between funders and contractors; London Tories tried to blame Mayor Sadiq Khan, though it’s not clear why. Engineers say the key is in Crossrail’s talk of software issues and time needed ‘to complete the full range of integrated tests’ — a reference to the line’s reliance on a combination of three signalling systems built into the trains that must interface with existing Network Rail kit on the outer sections. ‘The computing power of the train brain has to be enormous,’ observed Andrew Wolstenholme before his departure. ‘It’s probably as complicated as introducing a new Boeing or Airbus.’ Tunnelling through clay turned out to be the easy part.

The proposed £16 billion Crossrail 2, incidentally, will use just one signalling system along its entire length from Surrey to Hertfordshire. But if affrighted ministers take it off the drawing board after extended teething troubles on Crossrail 1, I doubt I’ll live to travel on it.

May’s greatest folly

As the political season kicks off, a contest to name Theresa May’s greatest folly would attract colourful entries. Leaving aside the general election call, the holding of Trump’s hand, the Chequers deal and the African dancing, some would say the most misguided of all her initiatives has been her consistent hostility to foreign students — who represent both a major source of export earnings and an important channel of UK influence or ‘soft power’ around the world. University leaders this week called for a change in visa rules to allow overseas graduates to work in the UK for two years — but Mrs May has been deaf to all such pleas. So here’s a couple of killer facts: growth in international student enrolments in the UK grew by 0.7 per cent between 2012 and 2015, compared with an average of 28 per cent for Australia, Canada and New Zealand; and the UK has just lost its position as the country that educated the largest number of serving world leaders: the US claims 58 graduate monarchs, presidents and prime ministers to our 57, with France a fast-rising third at 40.

The moral of this week’s column, if you like, is that if we can’t do the software and the soft power, we’re just a nation that digs holes and makes coffee.

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