Unfortunately, Jensen Huang is right about the UK

• By Mihir Sharma / Bloomberg Opinion

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Nobody in the UK wants to agree with a leather-jacket-wearing US tycoon, but it is tough to poke holes in Nvidia CEO Jensen Huang’s (黃仁勳) diagnosis of what has gone wrong with the UK.

The country has enough intellect, but not enough entrepreneurial spirit, Jensen told politicians and investors gathered in a converted London church last week.

Offered a million ways to win, it tends to find “the one reason not to do it,” he said.

Huang does believe there is talent on this island, a point he underlined by betting millions on five British start-ups. However, there is neither the financial environment nor the regulatory climate to allow British entrepreneurs to think on a grand scale.

As a House of Lords committee has said: “A procession of promising science and technology companies” is moving overseas. Oxford Ionics was bought by US-based IonQ for US$1 billion; OrganOx by Japanese medtech group Terumo for US$1.5 billion. Wise shifted its primary listing to the US. British companies that want to go big also have to go elsewhere.

What happened to the UK? This place once teemed with energetic amateurs, wacky inventors and empire-builders. How did a country that pioneered everything from football to steam engines to the joint-stock company start searching for reasons to not do things?

Most UK-based founders I have spoken with in the past few months offered up the same reason, unprompted: The UK fears risk-taking. Finance there does not have the appetite to support high-risk, high-reward ventures, and the state will not make the political gambles needed to shape a market through rules or procurement contracts.

This is a problem beyond tech. In fact, nothing defines the political and economic culture in the UK today so much as a pathological aversion to risk. Nobody ever wants anything to change, on the off chance it could be dangerous. Fear of what the future might hold has become the national ideology; the main difference between the UK’s major political parties is which vision of the 1970s they prefer.

Much of what holds the UK back can be traced to the same timid mindset. Why, for example, are its businesses chronically short of funds to invest? For one, UK pension money is no longer in equities; last year, pensions held just one-quarter of their assets in equities and 56 percent in bonds — the lowest and highest shares respectively of the world’s seven largest pension markets. The split was 43 percent-38 percent in favor of equities in 2014.

Too much of the country’s wealth is tied up in property. It is seen as a safe bet that increases in value — thanks in part to local councils, few of which dare to take a punt on permitting new building. There is a chance, after all, that it might spoil someone’s view or draw the wrong sort. Any project that survives is constrained by dozens of well-meaning rules. The result is not just a stagnant country, but also one that looks and feels poorer.

Councils fear new neighbors, businesses fear expansion and politicians fear losses or legal challenges. However, fear cannot be a country’s organizing principle.

Any modern liberal democracy has the responsibility to protect its people from the worst that might befall them. That is why welfare systems such as the UK’s exist. However, when countries keep expanding the safety net in a doomed attempt to insulate their citizens from any hazard, the system becomes unsustainable — especially when that same risk-aversion prevents the nation from growing enough to pay for its welfare perfectionism.

If the UK is not there already, it would be soon.

A widely read story in the Wall Street Journal last week outlined the degree to which the system has drifted from its original purpose. Disability payments, first designed for victims of industrial accidents, are today claimed by about 7 million people — more than one in 10. That number has risen by more than 60 percent among working-age adults since 2019; no other Western country has seen a comparable increase. When then-British prime minister Keir Starmer tried to trim just ￡5 billion (US$6.69 billion) off the system’s ￡100 billion-a-year bill, his backbenchers forced him into a U-turn.

Investors, depressed to discover that even a government with a huge majority could not fix welfare, sold gilts. Ten-year borrowing costs have risen from 4.5 percent to 5.5 percent this year, the highest in the G7.

Trying to protect people against every possible peril does not abolish risk; it just shifts it to another set of citizens — who might revolt. Brits need look no further than their French neighbors to see how that turns out.

This is the country that invented cricket and the spinning jenny. It is also the one that invented insurance. Protecting people against risk was a great idea. Such a pity it is the one that has come to define modern UK.

Mihir Sharma is a Bloomberg Opinion columnist. A senior fellow at the Observer Research Foundation in New Delhi, he is author of Restart: The Last Chance for the Indian Economy. This column reflects the personal views of the author and does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.