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Stop tinkering with tax and create an industrial strategy, says boss of L&G: How to reboot Britain – by the man with £1.2TRILLION of savings to invest
Nigel Wilson – or to give him his proper title, Sir Nigel – is a one-man Northern powerhouse and a one-man advert for social mobility. The boy from a council estate in the North East of England grew up to be Britain’s biggest investor.
And as chief executive of insurance giant Legal & General, where he is the steward of £1.2 trillion of our pension savings, he is determined to put the clout that gives him to good use. Wilson, who recently announced he is to step down after more than a decade at the helm, has devoted his time at L&G to trying to use the money his firm manages for pension savers to reboot the British economy through ‘inclusive capitalism’.
‘There is £5 trillion invested in UK pension funds. We should direct more of it into growth equity and infrastructure,’ he says.
In his view, a long-term industrial strategy is more important than specific tax changes in the Budget. Hunt’s debut, he says, was ‘competent’ on ‘pressing issues like childcare and empowering our cities’. ‘But we need real investment that raises living standards and solves climate change.
‘Tax charges in Britain are at an all-time high, but tax breaks are not necessarily the answer. The key question is how you structure industrial policy.
‘For too long, it was the Conservative party view that the market will deliver. But we’ve got to have an industrial strategy, backed up by a tax strategy.’
Ploughing people’s pension savings into neglected parts of the UK and into support for research at our best universities will, he argues, create a virtuous circle that benefits everyone. He says the disruption caused by the pandemic has opened an opportunity for the UK to bounce back. ‘Science and technology can give us a second chance. We have to seize it.
‘We have to be much more active in figuring out which new industries we are going to support. Otherwise our successful start-ups are bought by US firms and suddenly we have hollowed out the economy.’
He adds: ‘We will be a low-value, low-productivity, low-wage service economy with all of our manufacturing gone elsewhere and it will be very difficult to bring it back.’
We are, he argues, good at innovation but not at following through.
He notes that more of our pension fund assets are invested outside the UK than within our shores. Around £150 billion, he says, is invested in new-style pension plans but almost none of that has gone into early stage, potentially high-growth companies.
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‘They are the future FTSE. We can decide whether those companies list here or on the Nasdaq market in the US or in Amsterdam.’
Wilson, with 11 years as CEO, has served around double the time of a typical FTSE 100 boss. Since he took over in June 2012, the shares have produced a return of more than 340 per cent, well ahead of the FTSE 100.
The company was hit by the pensions meltdown in the mini-Budget, but his final full-year results showed operating profit up 12 per cent to £2.5 billion, with a 5 per cent increase in the dividend.
He has earned £41 million during his tenure at the helm of L&G but lives in a one-bed rented flat and uses public transport rather than driving. He heads back frequently to the North East and still enjoys a game of dominos in the pub.
If there were any danger of him getting too big for his boots, he would be put right by his Mam, who, he says jokingly, wouldn’t let him go to the local shops without a list.
He also enjoys telling the story of how, when he phoned her to tell her about his knighthood, she ticked him off for ringing too late in the evening.
Having put him in his place, she was, of course, ‘very proud’ to accompany him to Windsor Castle where he was knighted by the now King.
Does he think the economy would function better if more people from ordinary backgrounds like his were in charge? ‘The world is so complicated, you need people who look at life in different ways,’ he says.
Has his approach to economics, and to running L&G been informed by his North-Eastern roots? ‘Yes, yes. We should build a fairer society, it is about inclusive capitalism, not exclusive capitalism. We have gone backwards on social mobility.
‘A person who lives in the sort of house I grew up in, a council house, would find it incredibly difficult now to do a PhD at MIT [the elite Massachusetts Institute of Technology where Wilson studied].’
‘A lot of people don’t have mentors in their life. People in the North East might say to me: ‘I could have been you, I should have been you’ but they weren’t, because they didn’t have the advantage of great mentors and coaches that I had. People can get to the top with resilience and capability. Resilience is underrated.’
Unusually for the North East at the time, Wilson’s father was a Conservative. Nigel himself went canvassing for Labour aged 11. ‘I was politically engaged quite young. Now country comes first. I think people, place, then politics is the right order.’
His catchphrase ‘inclusive capitalism’ sounds good – if a little bit Tony Blair – but what does it actually mean?
It is, he says, about investing in projects that will make good returns for his investors and policyholders, and deliver a dividend for society.
Think housing, health, green energy and innovative companies spinning out of universities. ‘We want growth in real wages and for people to have the opportunity for a better life.’
During his time at the top, he has tried putting those principles into practice. L&G has backed the Helix in Newcastle upon Tyne, a £350 million innovation hub on a site that was previously a coal mine and the Brown Ale brewery.
He has also directed cash to the dreaming spires, with an investment of £200 million into the Life and Mind Building at Oxford University, for the zoology, plant sciences and experimental psychology departments.
Why does he think other insurance bosses have not gone the same route? ‘You need to have the confidence you are going to be in the job a long time and that you are going to be successful.
‘I never doubt I will succeed in the sense that I will always have done my best.’
Outside of work he is a keen runner and has several British masters titles over 100m, 200m, 400m and 800m and supports his local football team, Newcastle United. Does he have any regrets over his time at L&G? ‘I don’t think about ‘should haves’ and ‘could haves’, my brain doesn’t function like that. I have left them behind and I look forward, like when I left the North East.’
Wilson’s route out of the North was education. He went to Essex University, followed by a PhD in economics from the Massachusetts Institute of Technology.
Once L&G finds a successor to step in his shoes he is hoping to return to academia with a teaching role at a university. ‘I have unfinished business,’ he says. ‘Economics has been wrong and it needs some refreshing thought.’
‘We have got outdated models. The scale of disruption we see now is way beyond the capabilities of what was developed by Adam Smith and John Maynard Keynes so many years ago.
‘I want to put my shoulders to the wheel and help.’
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