Rishi Sunak has conceded that the multi-billion-pound business support schemes he designed as chancellor during the pandemic propped up companies that “would and should” have gone under, in a striking admission that has reignited the debate over how far the state should go to keep struggling firms alive.
Writing in The Times to coincide with America’s 250th anniversary celebrations, the former prime minister argued that Britain must learn to embrace the “creative destruction” that has powered the US economy ahead of its rivals, even if that means watching more businesses fail.
“It is never easy to sit in the Treasury and watch a business go under, but intervening is nearly always the wrong thing to do,” Sunak wrote, adding that the rush to assemble Covid support schemes left no time to distinguish between fundamentally weak firms and viable businesses knocked sideways by lockdowns. “As chancellor, this was one of the things I worried about most: had these interventions upended the natural processes of the economy? I fear they did.”
The intervention will resonate uncomfortably with the hundreds of thousands of small business owners who credit furlough, bounce back loans and business rates relief with their survival, but Sunak’s diagnosis of the UK’s underlying malaise is harder to dismiss.
At the heart of his argument is the claim that Britain’s economy has lost its dynamism. Nearly one in ten listed UK firms is now a so-called zombie company, generating just enough cash to service its debts and little else, a figure that has doubled since the financial crisis. As Business Matters reported earlier this year, a fresh wave of zombie firms is already facing collapse as HMRC begins to call in pandemic-era tax arrears.
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