IF Webinar Chaired by Harry Corbett

Intelligence Forums Webinar on 11 May 2021 was chaired by Harry Corbett and joined by twenty members across the country.

Our first speaker was Kevin Hollinrake MP, the Conservative MP for Thirsk and Malton, who in his early career set up various businesses, before joining Prudential, at that time, the largest estate agency in Britain. Five years later, in 1992, he co-founded Hunters Estate Agents (“Hunters”), now one of the most successful and fastest-growing estate agencies in the UK. 

Kevin spoke about the government’s pledge to level up the regional disparity in opportunities across all parts of the country, a task he suggested would take more than a few years. UK household consumption accounts for over 60% of GDP, which means that boosting income across the entire country yields huge benefits. The approach should not therefore be simply about spreading wealth from the south-east of the country to the north east because this won’t increase wealth overall. He believes that we should treat the UK’s north-south differences in the same way that Germany approached the unification of its east and west. 

Changes to the way in which government appraises investments will be necessary, he said. UK Public Sector Net Investment, of circa. £60 Bn p.a. has hitherto been allocated in accordance with the guidance set out in the Treasury’s “Green Book”. The result is that an investment which, for example, creates a job worth £45k p.a. in the south-east will be preferred to one which creates a job worth £25k p.a. in the north-east. The government has therefore announced that it is to change the way it calculates the benefit of an investment so that projects with a big regional impact are prioritised. He added that it takes far too long to deliver large investment projects (e.g. Heathrow T4 and HS2) and this needs to be accelerated.

Kevin highlighted the need for “connectivity” to support economic growth, but pointed out that if it was the only issue then Doncaster, for example, with its very good transportation links should be wealthier. It is key that the private sector delivers on the back of public sector investment. Government too often pays lip service to the private sector but its investment and contribution should be encouraged and applauded. 
Initiatives such as the new UK Infrastructure Bank in Leeds and HM Treasury’s Northern Campus in Darlington, the Freeport initiatives and the Green Industrial revolution, will all be a good start towards levelling up. However, not every area will be a Freeport and more tax incentives will be required to support SMEs, in particular. He advocated additional initiatives such as enterprise zones and EIS schemes. 

Kevin is a supporter of devolution, and believes that local mayors are really connecting with communities, and will play a key part in delivering the levelling up agenda. A more regional approach to banking would also be beneficial, he believes. In the UK, 85% of lending is through large national banks, in contrast to Germany, where mutual and regional banks are the largest lenders to local businesses. Data suggests that regional banks are more supportive of local community businesses through the vagaries of the economic cycle. 

Kevin agreed that levelling up had received a “lockdown dividend”, in that working from home has demonstrated that businesses no longer need to be so London centric. He cautioned however that the country still needs strong centres of excellence like London, and the current “Polo” effect is sucking jobs from the centre to beyond the M25.   

Londoners might argue that the city is key to supporting prosperity right across the country and must continue to play a critical role in fuelling the UK’s economic success, especially now that it has left the EU.

Next to speak was Jon Moulton,  a venture capitalist, founder and managing partner of the private equity firm Better Capital, and former managing partner of the private equity firm Alchemy Partners. He is an active private investor and has been working in private equity since 1980. His career has also included spells running Citicorp Venture Capital, Schroder Ventures (Permira) and the buy-out group of Apax, as well as being a director of numerous public and private companies.

Jon agreed with Kevin on the levelling up agenda, but added caution on regional funding initiatives. These need robust governance, accountability, management information systems and consistency from the outset, he said, citing a Welsh regional fund which had lost its entire capital before year two of operations. One contributing factor here had been that the Fund accepted applications by post and it subsequently transpired that the address of the largest applicant was a lock-up garage in Cardiff!

Concentration and Education are also key considerations he said. For example, a pound spent in Cambridge will, in the short term, generate a far greater return than a pound spent in Hartlepool. Cambridge clearly has an existing concentration of skills, science and research, and business infrastructure. Hartlepool, which doesn’t have his concentration, will take substantially longer to generate a similar return to Cambridge. There is no easy answer to levelling up, he said, and politicians should be under any no illusion that it is a zero sum game. It is not. It is actually a negative sum game.

Jon also talked about his charitable foundations. Having amassed a small fortune through his career he said that he wanted to spend his money doing good as well as getting some enjoyment from it. In 2018 he established the Jon Moulton Charity Trust to continue the work of his existing charity, the J P Moulton Charitable Foundation. The charities fund non-commercial clinical trials with the aim of making clinical advances and promoting the relief of suffering. Since inception, over 150, usually interventional clinical trials have been funded. These have been selected on the basis of high quality science, in a wide range of therapy areas including respiratory, women's health, oncology, cardiovascular, diabetes, multiple sclerosis, rare diseases, COPD, paediatrics, and COVID-19. As of May 2020 Jon and his charities have committed some £47 million to clinical trials.

He compared his charitable work to being a venture capitalist in that you need to understand the market and spot winners.There have been failures, he said, but also some good successes, without which tens of thousands of people would no longer be walking this Earth.

Jon was followed by Steven Wardlaw, the Chairman of  Emerald Life Limited (“Emerald”),the U.K.'s first insurance company to support women and the LGBTQ community, which he established in 2015. Previously he was the first English-qualified associate to join US law firm Baker Botts, and after becoming a partner he ran the firm’s Moscow branch, and subsequently its London office. 

He told us that during his 25 years law career he encountered vast discrimination in the financial services sector, and heard of many women and people in the LGBTQ community who had difficulty getting insurance because of gender or sexual orientation. 

When he established Emerald, his was faced with the challenge of where to start in an Industry which simply ignored these sectors. He commissioned a survey which revealed that 95% of LGBTQ respondents thought that they were poorly treated and 52% of non-LGBTQ people believed that the LGBTQ community was treated worse than they were. Not only was the Industry failing to fulfil its mandate but it was also missing a business opportunity. Steve recognised that immediate changes were needed in customer experience and the nature of advertising to these sectors, as well a change in the language used in the terms and conditions of policies. 

He told us how, in the late 1980’s, the ABI prohibited the industry from asking questions about a prospective or existing client’s gender and sexual orientation. However, insurers found other ways to profile existing or potential clients. In home insurance, for example, premiums for gamblers, florists and antique dealers increased as underwriters used such profiling as proxies. This resulted in bizarre anomalies where, for example, a male airline pilot might be offered insurance but male cabin crew might not be.

Emerald writes wedding, home and travel and pet insurance but wants to extend its offer to longer term policies. Recognising that behind all underwriting decisions are actuaries, Steve has attended actuarial conferences to challenge them on the pricing of long-term insurance products - particularly for gay life insurance. 

While he aims to get their approach reassessed, he has found it a very slow process. Although there are a few helpful supporters in the sector they haven't yet made the necessary changes. There is general inertia in the industry which is generally behind the curve and rarely takes the lead in innovation. It lacks the “disruptors” found in Financial Services industry, for example, and many Boards of Insurers comprise older, white males who are unlikely to understand diversity issues. 

He also noted that, while part of the FCA's role is to ensure that consumers are protected and fairly treated, regulation has massively increased as a result of its initiatives and has been a significant deterrent for smaller companies, such as Emerald.

Our penultimate speaker was Gary Grant, Executive Chairman of The Entertainer (Amersham) Ltd (“Entertainer”), the UK's largest independent toy retailer which he founded with his wife, Catherine, in 1981. Together they had seen an opportunity to make a toy store into somewhere that children and adults alike would visit, have fun, find something to ‘entertain’ themselves and ….come back again and again.

Entertainer, which has been operating in the UK, Jersey, and the Isle of Man for 40 years, has grown to operate 172 shops. In February 2019, the business purchased Early Learning Centre, with its 520 international franchise outlets, from Mothercare. 

Entertainer posted pre pandemic sales of over £200m, but Gary told us that the past year has been the most challenging in its history. Store closures for seven of the past 13 months, would have been terminal, he said, but for government support which has done quite an amazing job to keep the business and its 1600 jobs alive.

That said, he believes that more help will be necessary, citing scale of rental costs and business rates, mean that £1 taken on an internet sale has four times the value of £1 taken in a retail store. Business rates need to be significantly and permanently reduced if High Street retailers such as Entertainer are to be saved. Current rental levels, he believes, are unsustainable. 

Gary told us of the ethos of generosity that he tries to foster within his business. Generosity, he said, does not have to come in the form of money. People can be generous with their time and experience, their willingness to give, and with their assets. Entertainer has tied 10% of its profits to support children's charities, and has also established an initiative for its employees to be generous through monthly giving. As a result approx. 40% of staff now donate directly from their salaries to a charity of their own choice, and Entertainer matches the amount. He reminded us is even further enhanced through tax deductions applicable to charitable giving. 

Since 2011, Entertainer has operated a campaign called “Pennies”, through which its customers can donate by rounding up the cost of each purchase to the nearest £1. The resulting donations of between 1p and 99p have, over the past eight years, raised over £3 million without people really feeling the cost. 

In 2020 when the company was losing £1.25 million per month and didn't know if it was going to survive, Gary offered his help to the Trussell Trust. The Trust had just received a huge grant of food from Tesco, but had nowhere to store it or distribute it from. Working with his Banbury warehouse the business was soon was processing six semitrailers loaded with assorted provisions every day, and breaking it down into small parcels to distribute to the food banks. Over an eight week period Entertainer, Tesco , Sainsbury and British Gas came together to distribute 9 million meals every week to those in need. 

Gary left us with the thought people who don't even know what their bank balances to the nearest hundred pounds could surely afford to give £100.

Our final speaker was Ian Thornton-Trump , Chief Information Security Officer (CISO) at Cyjax Ltd (“Cyjax”), a leading digital security and threat intelligence company. Ian served with the Canadian Forces (CF), Military Intelligence Branch and the CF Military Police Reserves, ultimately retiring as a Public Affairs Officer. He spent a year as a Criminal Intelligence Analyst with the Royal Canadian Mounted Police at about the time that cybercrime, such as online bullying, drugs and abuse, became an issue. Ultimately he established himself as a cybersecurity analyst/consultant, and in 2015 moved to Scotland and later joined Cyjax. His 25 years of experience has made him a sought-after consultant who specialises in cyber threat intelligence programs for small and medium enterprises.

Ian reminded us that companies which are held hostage through ransomware are often forced to pay huge ransoms in untraceable crypto currencies such as Bitcoin, to recover their systems and data.  The cost to the business, its operations and credibility can be enormous. The best attack that you can have, he said, is the one that you never see - because you are properly prepared. 

He believes that companies must more openly report breaches of their security, and disclose the magnitude and impact of these. The structures of much corporate IT is open to cyberattack, he said, and companies must review and renew their systems architecture to defend their businesses. The rapid pace of technology, he warned, has created a rapid change in the attack surface and malicious software capability. Consequently companies must recognise that last year’s protective technology may be ineffective by next year.  

He applauded the long term investment that the UK has made in the digital but cautioned that its investment in cyber policing is seriously inadequate.How is it, he asked, that for $156 you can buy a device online which enables you to send thousands of phishing emails? Why isn’t this type of product licensed? Why aren’t fines significantly higher to deter illicit usage?Cyberattack has the potential to undermine the will of government, he warned, and protecting against such attacks is therefore fundamental to democracy.US PresidentJoe Biden has called for $10 billion investment in cybercrime prevention, and the UK must substantially increase its own investment in cyber policing and aggressively chase cybercriminals across jurisdictions.