Red Dawn: While the Conservatives fight over Europe, Corbyn tightens his control over Labour
Politics Insight
At the beginning of this year the outlook for Jeremy Corbyn’s leadership of the Labour Party was uncertain, to put it quite mildly. The Labour leader returned from the Christmas break to conduct a seemingly unnecessary Shadow Cabinet reshuffle aimed at seizing control over foreign and defence matters. This descended into a farce as it transpired that he could not move Hillary Benn, the Shadow Foreign Secretary, without triggering the resignations of up to 11 others in the Shadow Cabinet and could only ease Maria Eagle out of her post of Shadow Defence Secretary after a comical process in which various other candidates refused to take on the portfolio. He finally settled upon Emily Thornberry as his alternative, whose qualifications for the position appeared to be (a) that she was a known sceptic about renewing the Trident nuclear weapons system, (b) he knew her well as a fellow Islington MP, and (c) it was possible (eventually) to persuade her to accept this particular promotion.
The whole spectacle simply stoked a Westminster consensus that despite the scale of his victory in the Labour leadership contest in September, Mr Corbyn was an incredible figure as a potential Prime Minister and hence Labour MPs would find a means of ejecting him from office, probably through a mass refusal to serve under him, with dismal election results in May being the pretext for a move to be undertaken between the end of the EU referendum campaign and the Labour Party Conference in September. That impression persisted throughout January and into February. It was compounded by the fact that the public response to Mr Corbyn had been a wider advantage for the Conservative Party over Labour across the opinion polls and some absolutely appalling ratings for him personally.
Like the dog that did not bark, however, one of the most significant stories of British politics over the past two months is that Mr Corbyn’s enforced departure appears to be considerably less likely. The mutters of discontent within the Parliamentary Labour Party are still there but the mood is one of fatalism among those who would most like to witness a change in the leadership. Unless events in the next two weeks operate against him, we are in a distinctly unanticipated political situation in which it is more likely that David Cameron might be deposed by his own political party barely one year after his upset majority victory than it is that Mr Corbyn will be politically decapitated. Why?
Divisions within the Conservative Party
The course of the referendum campaign thus far has hardly been an attractive one for the Government and the Conservative Party. The entire enterprise has seemed like an extremely loud and unappealing family argument within the centre-right of British politics with the centre-left largely silent on the sidelines. Add to this concerns about a slowing economy, a Budget which had its presentational challenges, and domestic controversies such as a ministerial fight with the medical profession, and the past two months have seemed like a series of self-inflicted wounds within Whitehall.
A Conservative lead in the opinion polls of 10-12 percentage points over Labour viewed a mere eight weeks ago has since disappeared entirely. While this is in one sense inconsequential, the next election is not scheduled until May 2020, it has made the Labour Party and its leadership seem much less bad by comparison. Mr Corbyn’s personal ratings are not impressive but it cannot be argued that they are in free-fall. If anything, partly because of an improved performance at Prime Minister’s Questions since he moved away from his ‘Gardeners’ Question Time’ approach, his standing with Labour voters is improving.
The Corbynites are focusing on organisational control rather than policy change
There has been an uneasy sort of peace within the Labour Party since the reshuffle shambles of January. This is in part because Mr Corbyn and the Momentum movement that constitutes his supporters have deliberately avoided major confrontation over matters of policy (even Trident is under a review rather than imminent action). Instead the focus has been on securing the seat-by-seat and branch-by-branch organisational control over Labour as its highest priority for 2016 with policy change to come along later. The vacuum has been filled by numerous campaigns against whatever the Government is doing rather than in favour of any kind of specific alternative agenda associated with Labour. The ambition here is that by taking over the party at all levels, resistance to a much more radical policy agenda when it comes will be futile, as indeed would any attempt at a successful leadership revolt.
The likely results on 5 May will not be bad enough to trigger internal insurrection
The outcomes of the various elections being held in Scotland, Wales, London and other parts of England are not destined to be a comfortable experience for the Labour Party. It will take another battering north of the border where the SNP is set to win a whopping majority in the Edinburgh Parliament once more and will probably take more than 50% of all votes cast in the constituency ballot. Labour is braced for less spectacular losses in Wales, which will leave it either needing a coalition partner to remain in office or will have to soldier on as a minority administration of weaker status than as of now. It is also likely to lose seats in the English council contests as these were mostly last fought in 2012 and that year proved to be the high point of Ed Miliband’s tenure as leader. Losses could be 150+ seats.
None of this will matter if, as expected, Sadiq Khan defeats Zac Goldsmith in London. A Labour win in this prominent contest will basically cancel out defeats elsewhere. This is especially so because the Conservative electoral strategy in the capital city appears to consist entirely of seeking to couple Mr Khan with Mr Corbyn and/or accuse him of association with Islamist extremists. If that linkage does not work in London, then it will be harder for Mr Corbyn’s foes to cast him as a liability.
Most Labour moderates have been distracted by the EU referendum
In all of the above, Mr Corbyn has been assisted by the fact that the moderates within his own ranks are far more passionate about ensuring that the UK remains within the EU than he is. He has made a single speech on the subject so far and most of his core supporters have been similarly disinterested. He will do nothing that allows it to be said that he has undermined the Remain campaign but is highly content with an outcome in which he and his allies concentrate on the internal levers of power in the Labour Party while some of the most prominent personalities in his own ranks spend their time seeking to ensure that the centre-left participates in sufficiently large enough numbers on 23 June.
There is still no consensus around an alternative leader
In politics it is hard (but not impossible) to beat somebody with nobody. This is notably true when, as is the case for the Labour Party, the exact method for removing a leader cleanly is unclear. Mr Corbyn is still deemed an unsuitable leader by more than 80% of his fellow Labour MPs but unless there is some sort of consensus on what type of person should replace him, and better still a single name, then all the plotting available to man is unlikely to lead to an outcome.
The anti-Corbyn camp remains divided between those who would prefer an elder statesman such as Alan Johnson, the former Home Secretary, others who seek an acceptable contender from the middle of the party spectrum such as Mr Benn to minimise the civil war involved in a leadership change, and others on the Blairite branch who believe that Labour will only have any chance of victory if it leaps a generation to someone such as Dan Jarvis MP or Stella Creasey MP.
As a result, the working conclusion must be that Mr Corbyn is more likely than not to be there in 2020. What that means for British politics (and the UK economy) will depend on whether the Conservative Party is correct in its current calculation that it can afford deep division over the EU referendum and then engage in sufficiently credible reconciliation thereafter not to risk the prospect of losing office.
Tim Hames, Director General, BVCA
Research Insight
Scale-up UK
The UK has made significant advances in developing a dynamic entrepreneurial sector over the last two decades, with 600,000 new company registrations reported since 2012, as highlighted by the BVCA’s Innovation Nation campaign. However, while there has been an increase in entrepreneurial activity, there is concern surrounding the growth performance of these new companies and how to best position the sector for success.
In light of this, a new report from Barclays was launched this week on the future of business scale-ups in the UK. The report, Scale-up UK: Growing Businesses, Growing our Economy, is part of a project partnership between the business schools of the University of Oxford and the University of Cambridge to identify the barriers to small businesses scaling-up and develop solutions to help UK companies grow and create more jobs.
Led by Stelios Kavadias from the Cambridge Judge Business School and Professor Thomas Hellmann from the Oxford Saïd Business School, the report examines ways to enhance financing options for start-up businesses and how to foster effective management skills needed to drive this growth.
The role of management
Concerning the issue of effective management, Judge Business School offered six key recommendations to help start-up managers overcome the obstacles to sustainable growth:
Financing UK scale-ups
Saïd Business School examined the role of finance in scaling-up by SMEs and found that while UK investors predominately focused on early-stage investments, there was a funding gap for later-stage investments for scale-ups. The key recommendations and action points required for improving the funding ecosystem are identified below.
1. Larger funds
Based on investment data, the report shows how scale-ups in the US have access to funding from larger funds that are able to provide larger investment rounds, thus allowing companies to grow faster. In light of this, the UK needs more VC funds over £200 million that focus on funding scale-ups, with more experienced firms aiming to raise over £350 million. The report also suggests that VC funds should invest both within and outside of the UK, and establish themselves as pan-European or global leaders.
2. Smart money
Growing an ecosystem of ‘smart money’ requires a long-term perspective in which VC funds can develop their expertise and networks over time. The report suggests that this growth can be accelerated by linking up with experienced international players, drawing in particular on US expertise. It recommends that the UK Government work together with institutional investors to renew interest in the asset class and to build greater expertise for making allocations to scale-up funds.
3. Venture debt
While equity is the predominant method of financing entrepreneurial companies, the report identifies venture debt as an innovative method of providing funds to scale-ups and suggests that UK banks and specialised funds develop a larger offering.
4. Stock markets
The report recommends that the LSE should continue and enhance its efforts to cater to the needs of scale-ups, including working alongside other leading European stock markets to create a liquid market for scale-up stock.
5. Private liquidity
While venture investors can obtain liquidity from listing their companies on stock markets or selling them via a trade sale, the report highlights the economic benefits of secondary transactions, especially for earlier-stage investors. It recommends that the Government and investment community find more efficient ways of trading secondary private company shares and that the Government revisit both the regulation and taxation of these transactions.
6. Collect data about the scale-up financing
Since current data collection efforts on the scale-up funding environment are fragmented, the report recommends that Government and industry professionals coordinate with the Scale-Up Institute to establish best practices and more unified approaches.
Overall, the report concludes that the UK faces an important inflection point: if it builds on its strong start-up ecosystem and develops an attractive scale-up ecosystem, it is well positioned to become the European leader of the scale-up movement. And who can disagree with that.
