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Good morning. I need to get rid of the habit of making big statements about what I will or will not address in an upcoming note, because it will inevitably be replaced by a scoop. Today is big from Daniel Thomas, Anna Gross and Jim Pickard: Liz Truss is launching a last-ditch effort to convince Japan’s SoftBank to list Cambridge-based tech company Arm Holdings in the UK.
I don’t know if she’ll make it, and in any case, Cat Rutter Pooley’s City Bulletin is the newsletter you want for that (you can Register here). But the story also reflects and reveals many terrible things about the new UK prime minister and her goals. Some thoughts on that below.
One thing I can say for sure about my next note is that it will arrive on Tuesday. We’re on a bank holiday: I’m thinking of checking out Center Parcs.
I beg you please just list My Arms
Liz Truss is flirting with Arm for a lot of reasons. It is a reflection of the UK’s ability (or shortfall) to combat and reverse the decline of its listed tech sector. Selling Arm to SoftBank would have been a mistake from the start, which many UK politicians see as a huge misstep in their efforts to protect and grow the UK’s semiconductor industry. . (For Andrew Hill’s In-depth analysis of all you see if you haven’t yet.)
But more importantly for the purposes of this newsletter, the new prime minister is really invested in showing businesses that her government is different from those that have gone before: especially the two post-Brexit governments. by Theresa May and Boris Johnson.
That is not the only reason why Truss .’s government review the government’s anti-obesity strategy, plan to remove the limit on bankers’ bonuses, or really attract SoftBank. Much of it has to do with Truss’ personal politics: she’s never liked the anti-obesity strategy and has a particular aversion to the sinful taxes that come with it. The only thing that appealed to her about the banker’s bonus limit was it didn’t really work.
But it’s not just about proving factual or perceived wrongs. Truss and her prime minister, Kwasi Kwarteng, wanted to signal to businesses in general and the city of London in particular that their days in the political cold are over. That’s also part of the government’s ‘target’ of 2.5% growth: it’s all part of sending the same signal.
There are several points to be made here. First is as Chris Giles warns in his columnTruss and Kwarteng are taking huge risks with public finances and the outcome could be dire.
The second – and this is the problem that preoccupies Truss’ inner circle – is the problem that Helen Thomas made in her: that is, sure, it would be nice to drop the bounty cap, a policy that doesn’t work, but it’s relatively thin on what the City needs and wants, and really what the UK economy needs and want.
There are internal Tory pressures here that are inevitable and a limiting factor. There’s a reason why Truss, and her defeated rival, Rishi Sunak, felt they had to make ostentatious commitments to Conservative opponents over new housing. As Peter Foster explains in the UK newsletter After Brexit, Truss is continuing sounds pretty max on the Northern Ireland protocol (which has implications for our relationship with the EU and therefore for growth) is partly down to where the internal politics of the Conservatives are.
And then there’s China. The story of Daniel, Anna and Jim makes it very clear that the US government’s growing hostility towards China may have opened the door to a UK government victory over Arm’s listing:
One banker involved in the talks said that New York was the “obvious choice”, but added that the US government’s decision to block exports of advanced chips by rival Nvidia to China had prompted the US to watch. a closer look at legal risks.
The big unspoken story in the Conservative leadership election is that China skepticism has become a major force within the party. That’s a big part of why Tom Tugendhat, a Boris Johnson Remainer and critic, is able to garner support from the right as well as the left of the party. And that’s a big part of why the likes of former Tory frontman Iain Duncan Smith and indeed in the end it was Tugendhat who pulled after Truss and not Sunak.
Truss’s hawkishness on China is a policy stance that makes sense given her government’s ability to present itself as an unashamed advocate of growth, as well as within the party to exert pressure on China. The shape of Brexit and the UK’s planning laws also impose limits of their own.
Now try this
I wrote about the most important issue for the next edition of HTSI: boots! Also had a photo session with one of my more ostentatious suits.
However you spend it, have a lovely weekend.
Today’s top news
Energy security bill on hold | Jacob Rees-Mogg, UK business secretary, will pause or even abolish the government’s existing “energy security bill” to prioritize legal support for businesses.
Shopping declines | Retail sales drop than expected in August as UK consumers grapple with soaring prices and high energy costs, increasing the risk of a recession.
Catch up with the times | King Charles III intends to “miniaturize” the monarchy to meet public demand for a more modern institution at a lower cost and with less fanfare.
Risks and rewards | Regulators of the Bank of England and City executives have welcome the proposal of Kwasi Kwarteng to end the bankers bonus limit. “There is something quite brave and admirable about it in some respects,” said former Treasury Secretary David Gauke. “But it has a big political risk.”