Aveva: Another Case Against British Policy

The technological software company Aveva is a very successful Cambridge spin-off company. Although in a different field of activity from ARM, it shares many similarities with the firm that Mrs May allowed to go to Japanese owners in her first days in office. These include the availability of talent and significant start-up funding in physical and intellectual proximity to Cambridge, and strongly competent management.

This company has become a world leader in an area where there is an almost-infinite global demand for their software, which provides a template for designing almost any process plant and the structures in which it can best operate. It is growing promisingly, and could probably have a great future on its own. However, a leading French company has decided that they way forward [regardless of Brexit] is to take Aveva over, then incorporate some of its operations into Aveva, and profit further.

There is no French university in the global big league: where Cambridge, Oxford and the leading London colleges are stars; so it makes sense for the intending French owners of Aveva - as with the Japanese owners of ARM - for the time being [at least] to maintain and even extend the operations and the investment at the Cambridge site. Cross-fertilisation and the simple buzz of social and physical proximity to talent are huge benefits that Britain gains from having top quality intellectual resources.

Even the dim politicians who are dawdling about the Brexit discussions, and balking at the inevitable decision that any sane leaders have to take, that Britain must remain within the European Economic Area must see, yet again, that Britain has huge resources of inventiveness that have for centuries been the country's greatest economic asset. Discussions about how far the UK can collaborate with EU institutions that will keep the UK in the closest contact with the intellectual developments forging ahead are a very important aspect of the whole Brexit debate. There are some signs that collaboration and the transfer of people between UK and continental universities are already being reduced by the irrational fears which people like Liam Fox and the 'hard Brexiteers' are unconsciously fostering in people who are concerned about their personal futures.

As with the concentration of intellectual and technical resources in insurance and banking in the City of London, so with the leading universities the concentration of technical and scientific talent in the British hubs is massively greater than anywhere on the continent. If the City or Cambridge University is weakened by any sort of boycott by the EU, it will not enable the French to build up Paris as a hub for finance, or Bonn or Bologna as a global technology giant: any spiteful weakening of British institutions will merely strengthen New York, Singapore and other non-EU business centres, and the great universities of the USA as foci for research. Specialist journalists have been making this point effectively over some years, but it has not yet spread into the wider public consciousness and has barely touched the limited wits of the political class. It would be hoped that the example of Aveva would enlighten them, but my expectations of those woodentops are extremely low.

A Long Week

Harold Wilson, allegedly the Queen's favourite prime minister, said "A week is a long time in politics".

The present prime minister must be finding the weeks constantly elongated as events turn against her and more of her ministers begin publicly to cavil at the inheritance of Osbornian austerity that almost cost the Tories the election. The precarious position of the party in parliament makes it almost impossible for the leader to dismiss querulous ministers; and the chancellor [whom she expected to be able to dismiss, following an electoral triumph] is now in a position strongly to influence the Brexit discussion.

A delegation from the City of London is off to Berlin this week, to make an assessment of the appetite of the Germans for a form of Brexit that would leave the UK firmly within the European Economic Area. The shock of the Brexit decision has been followed by months of assiduous work in the City, and there is no doubt that the loss of [at least] tens of thousands of jobs from the financial services would be a calamitous blow to the whole British economy. The financial bubble that has been inflated ever since 1986 in compensation for the destruction of the materially-productive bulk of the economy has provided a support mechanism for the economy, and its removal would have utterly catastrophic consequences. The chancellor is now fully aware of this; but it is doubtful if the prime minister could comprehend this: it is also questionable whether all three Brexit Ministers - Davis, Johnson and Fox - fully understands the importance of the point. Certainly the insouciance displayed by Davis on the matter is alarming.

But the clock has been ticking, and those who are capable of recognising the signs of impending crisis have begun to read them the same way. A minority of Labour MPs also showed last week that they have a pretty good idea of the problem, when they voted against the party line to stress their concern that Corbyn's left-wing contempt for capitalism could impose on the Labour party an interpretation of Brexit that would plunge the country into chaos and a whole era of impoverishment. A tiny number of extreme lefties would be happy to impose the hair shirt austerity of the Stalin era in Russia on the British nation; but they would not have many followers, and the Momentum movement has not yet gained sufficient power to unseat all the rational Labour MPs if there were to be an early general election.

All the rational Conservatives have come to realise that their precarious alliance with the Paisley faction must last for at least the two years while the Brexit negotiations continue. If the government can gets its act together in the next month, recognising that the maintenance of momentum in the economy depends on being in the European Economic Area [on the best terms that can be negotiated: though they will not be ideal], there is a chance that they will gain sufficient goodwill in the mass of the population to have a chance of winning an election. That is conditional on the change in policy that I mentioned yesterday: there needs to be more money for public sector workers' pay, as Gove and Johnson are not pointing out. And there must be a resolution of the student fees issue: the reckless promise of Labour in the last election, simply to abolish those fees [and probably write off the debts owed by past borrowers] puts the Tories in an impossible position as long as they retain the Osborn line; so they are going to have to admit that so many holes are being poked in austerity that it might just be wise to admit that the policy is not acceptable.

Wars are fought by selling government bonds, to buyers who accept the extreme urgency of the situation. The present situation is no less alarming than a war. The government must be willing to replace austerity by a combination of flexibility on key areas of public spending and a massive investment in infrastructure, coupled with the development of a facility for the state [directly and through the banking sector] to invest heavily in all the firms that have credible business plans to advance technology and innovation. Mrs May's early decision to let Japanese speculators buy ARM was a very bad indication of her incomprehension: she needs to be educated; otherwise, like Anthony Eden, she needs to be taken away on leave. And there are not many weeks left for one or the other of these steps to be taken. The Tory party has saved itself by ruthlessness in the past: the era of "you've never had it so good" followed on very soon after the Suez catastrophe. They need to find the same strength again: with or without Mrs May.