From where Rishi Sunak sits, he might regard Taylor Wimpey’s bumper set of first-half figures as a triumph of policy-making. The chancellor threw subsidies at the housing market during the pandemic in the form of stamp duty holidays and probably hoped to see what has now materialised: record house completions and the UK’s third largest builder talking about profit upgrades and “excellent momentum into the medium term”.
From a policy perspective, though, the proper way to look at events is the precise opposite: the stamp duty giveaway was a waste of public money. The savings inevitably cling to the seller as much as the buyer, and, as should now be clear, the big housebuilders did not need a helping hand to get through lockdown.
The boom would have happened anyway because the basic ingredients of a helpful trading backdrop were in place. Interest rates were at rock-bottom, mortgage availability was good and pent-up post-Brexit demand was still being released.
At a push, one could argue that the initial holiday, announced early in the pandemic, helped to create a little confidence in a sensitive corner of the UK economy. But the extension, announced by Sunak in his budget in March this year, was indefensible. By then, take-off had happened and the housebuilders were busy buying land again. Indeed, Taylor Wimpey, wisely, had raised £500m from investors in mid-2020 to get ahead of the rush.
The company was never a member of the industry chorus intimidating Sunak with talk of a “cliff edge” if the holiday wasn’t extended, it should be said. Others were, though, and the chancellor should have ignored them and looked instead at how fat 20% profit margins (more in some cases) were coming back.
The net cost of the extension was put at £1.3bn by the Treasury in the current tax year. That’s small beer in the context of the overall Covid support package for business, but it is still money than could have been directed at sectors genuinely in need. Sunak was naive.
Why not sell chip firm Arm to the US?
Is the UK really about to block the $40bn sale of Arm, the celebrated Cambridge-based chip designer, to Nvidia of the US on national security grounds? The verdict of Oliver Dowden, the digital secretary, is keenly awaited – he’s already received an assessment from the Competition and Markets Authority – but Bloomberg this week cited sources saying “the UK is currently inclined to reject the takeover”.
Outright rejection would be bizarre since it was a Conservative government in 2016 that hailed the sale of Arm to SoftBank of Japan as a case of an overseas investor “backing Brexit Britain”. The boast was baloney but it’s hard to understand why American ownership should present more security problems than Japanese.
The bigger worry, you’d think, is the competitive one. Would Arm’s famously neutral open-licensing model be threatened by being owned by a big chip-maker? That debate is hotly contested, but Dowden should also take note of Arm chief executive Simon Segars’ argument that the Cambridge facility needs investment to get fit for the era of artificial intelligence and that the money is most likely to arrive under Nvidia.
Segars is obliged to say that, of course, but he may also be correct. SoftBank wouldn’t necessarily list Arm in the UK. It might just fiddle ineffectually, which wouldn’t help the cause of UK investment.
Maybe Dowden has been presented with fresh facts, but the best outcome to this saga still looks to be a deal in which Nvidia is obliged to make nailed-down long-term promises about backing jobs and research in Cambridge. Life would be easier if Arm had never been sold to SoftBank in the first place, but that ship has sailed.
Open mind needed if Mike Ashley gives Frasers job to likely son-in-law
Mike Ashley doesn’t do corporate governance, so nobody should be surprised if he is about to name his 31-year-old prospective son-in-law as chief executive of Frasers, owner of Sports Direct, as the Telegraph reported. Michael Murray has been the man in the frame ever since Ashley gave him the bizarre title of “head of elevation”.
One has to be careful with charges of nepotism, however. There was a fuss 20 years ago when a fresh-faced 33-year-old became chief executive of Next, where his father had been chairman until a few years earlier. Simon Wolfson turned out OK. He’s still there, is regarded as the smartest retailer in town and Next is now worth almost four times as much as Marks & Spencer.
That doesn’t guarantee that Murray will be a success, obviously. It’s just means it’s hard to tell before they start.