The best joke in Philip Hammond’s autumn statement was the line about how he is injecting £400m of venture capital funding into the British Business Bank “to tackle the longstanding problem of our fastest-growing technology firms being snapped up by bigger companies, rather than growing to scale”. A day later, one such UK pioneer, Edinburgh-based Skyscanner, is being bought by large Chinese travel group Ctrip for £1.4bn, a sum that makes Hammond’s £400m fire-fighting fund look like a water pistol.
The Treasury might argue that it has smaller, earlier-stage companies in mind for its £400m and that Skyscanner, boasting 60 million users a month for a service that scans the internet for cheap flights, had already achieved scale.
That objection would be fair only in part. Skyscanner had indeed achieved profitable success, but one can assume the Chinese are willing to pay 80 times top-line earnings only because they think much more lies ahead. They may be right. Skyscanner has expanded into the hotel and car-rental markets and others could follow. In time, the business could emerge as a serious competitor to the likes of Expedia.
In the end, of course, the government can hardly stop entrepreneurs selling their businesses if they wish. Gareth Williams, Skyscanner’s co-founder and chief executive, may also have been tempted by more than a high sale price. The deal brings the opportunity for his firm to tap Ctrip’s deep pool of Chinese tourists in search of international travel.
From outside, however, this takeover feels like another lost opportunity for a British-owned company to pursue global leadership under its own steam. Each case is different, but Hammond may discover that the biggest obstacle is cultural. Horizons in the UK are increasingly set to the short-term, and the City’s influence is strong. There are honourable exceptions: note how Baillie Gifford, a Skyscanner investor since last year, said it would have been happy to support further growth of the firm as an independent company. Unfortunately, such an appetite for long-term adventure is rare.
The remedy to the problem Hammond correctly identifies is not obvious. But his £400m, though welcome, is unlikely to be it.
Real estate is used to feast or famine, but not like this
Forget the government’s plan to ban letting agents from charging fees to tenants. Estate agents’ real troubles are more basic: housing transactions are plunging – or “running significantly below 2015”, in the more restrained language of Countrywide, the UK’s largest operator.
Feast or famine is a normal state of affairs in estate agency, but, even in that context, change has come swiftly. The share price tells the story. Countrywide floated at 350p in 2013, raced to 650p within a year and was still as high as 600p as recently as May last year, when George Osborne’s help-to-buy schemes were in full swing. Now the shares stand at 170p, down another 12% on Thursday.
London, where Countrywide reports exchanges down 29% in the latest quarter, is the group’s biggest headache, but its nationwide volumes for 2016 are still expected to be 6% lower, with a further fall on the cards for 2017. The catch-all “Brexit uncertainties” take some of the blame, but in London the bigger factor seems to be former chancellor George Osborne’s hikes to stamp duty on higher-priced homes in December 2014, and again April this year. Fewer people can afford to buy £1m-plus homes, or they are deterred by the tax bill.
In the absence of a U-turn on stamp duty rates by Hammond (no sign so far, despite the hit to the Treasury’s coffers), Countrywide and its peers will just have to wait for wealthy Londoners to accept that their houses may be worth less than they thought. It will happen – but slowly.
No one knows what Brexit means, not even the OBR
Give Robert Chote a break. Or, if you prefer, attack the chairman of the Office for Budget Responsibility for the right reasons. In recent years, the fiscal watchdog has generally been too optimistic in its forecasts of how the UK economy would perform. So it is bizarre for hard-line Brexiters now to declare loudly that the OBR is somehow infected by “doom and gloom” in thinking growth will slow to 1.4% next year.
These predictions are always best estimates, compiled in the face of uncertainties. This time the uncertainties are greater than ever. Nobody can say with much confidence how the economy will perform in the run-up to an event as significant as exit from the EU. An estimate of growth of 1.4% seems as good as any. The irate Brexiters should calm down: the real outcome will be revealed soon enough.
