This drives me absolutely crackers
Originally sent exclusively to The Letter subscribers on June 8th. Want to be the first to get my personal newsletter in your inbox every Monday at 7am? Subscribe for free here.
do you know what drives me absolutely crackers?
Barriers to growth.
In my experience, most barriers to growth fall into three constraints:
Capital
Talent
You, the leader
We’ve discussed these plenty of times in this newsletter.
The good news is that you can do something about all three.
Get yourself right, and you’ll attract better talent and more capital. That’s a given.
Choose the right business model, become a better leader, and most of these obstacles become manageable.
But this week I stumbled down a rabbit hole and discovered a fourth constraint.
The frustrating part?
There’s virtually nothing you can do about it.
Energy.
More specifically, the cost of electricity.
I know what you’re thinking. We all know energy is expensive. We all moan about the bills. But I started digging into the numbers and what I found genuinely shocked me.
As a starter for ten, for every £1 a UK business spends on electricity, a similar business in France could be paying around 60p.
Let that sink in.
Not because they’re smarter.
Not because they’re more productive.
Not because they’re working harder.
Because their government sorted out energy, and ours didn’t.
And we’re all paying the price.
For years we’ve blamed everything else.
The war in Ukraine? Not really.
The Strait of Hormuz? Not on your Nelly.
Donald Trump? Nope.
Decades of governments kicking difficult decisions down the road?
Now we’re getting warmer.
The reality is that long-term energy policy requires governments to think beyond the next election and beyond the next Parliament.
Unfortunately, short-term thinking has long-term consequences.
And those consequences are showing up in our electricity bills.
The French, and frankly most of the world’s major economies, pay less for energy than we do.
I use France as an example because I can get to a factory in Calais quicker than I can get to one in Newcastle.
This matters.
If I want to build a factory, expand a manufacturing operation, or invest in production, energy is a major cost.
If another country can offer electricity at half the price, where do you think investment is going to go?
This isn’t a small issue.
It’s a massive competitive disadvantage.
Think about it.
Britain is one of the richest countries in the world.
We’ve got the North Sea.
We’ve got some of the biggest offshore wind farms on the planet.
We’ve got world-class engineers.
So why do British businesses pay some of the highest electricity prices in the developed world?
Why is a factory in France paying dramatically less than a factory in Britain?
Why is American industry paying a fraction of what we’re paying?
For decades, governments have talked about helping businesses grow while simultaneously making energy more expensive.
Every politician talks about growth.
Every politician talks about productivity.
Every politician talks about creating jobs.
But if you wanted to make it harder for businesses to grow, what would you do?
You’d give them some of the highest energy costs in the developed world.
Imagine you’ve got a bakery, a factory, a warehouse, a leisure attraction, an ice cream plant, or a restaurant.
Sounds familiar to the bloke writing this newsletter every week.
Your electricity bill isn’t a luxury.
It’s a necessity.
And every extra pound spent on electricity is a pound that can’t be spent on wages, training, equipment, investment, expansion, or hiring.
France decided decades ago that cheap energy was a strategic advantage.
They built nuclear power.
They backed industry.
They treated energy as critical national infrastructure.
Meanwhile, Britain spent years talking, delaying, changing policy, changing direction, and kicking difficult decisions further down the road.
And now business owners are paying the bill.
What’s most frustrating is that this isn’t some great mystery.
We know what needs to happen.
Build more nuclear.
Expand domestic energy production.
Reform the electricity market.
Remove unnecessary costs from business energy bills.
The solutions exist.
What’s missing is the political courage to implement them. If we start today, we see the benefits in 10 years. That’s why they don’t do it, for fear a successor government reaps the plaudits. That and 20 to 40 billion plus of infrastructure before you see the bills come down; However that’s a one off cost for massive long term benefit. Please keep in mind; we spend 220 to 240 Billion on the NHS every year. Every year.
Every government wants growth.
But growth doesn’t come from speeches.
It comes from making it easier and cheaper for businesses to operate.
And right now we’re doing the opposite.
I want us to get to cheap, clean, green energy.
I genuinely do.
But if we’re not careful, by the time we get there, we’ll have hollowed out large parts of our manufacturing base.
The UK could have a thriving manufacturing industry.
We have the talent.
We have the capital.
We have the entrepreneurial spirit.
But if our competitors can buy electricity for half the price, we’re fighting with one hand tied behind our backs.
If this has tickled your taste buds and connected enough brain cells to spark some interest, I’d encourage you to spend a few hours looking into the subject.
I think we need to be talking about it a lot more.
That, and turnover taxes.
Until next week.
To your continued success,
James
P.S. Have you seen Business Masterclass is changing? I am holding a free business workshop on exactly what we will be covering, and how it can help your business. Click here to sign up for the free webinar and get a taste of what Business Masterclass is all about.