Rishi Sunak: I regret £140bn Covid business bailout
Rishi Sunak says he now worries the Covid business bailout may have distorted the economy, leaving too many weak firms hanging on.
Rishi Sunak has said he fears the Covid support he put in place for businesses may have gone too far.
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Writing for The Sunday Times, the former prime minister says the emergency help introduced during the pandemic may have “upended the natural processes of the economy”.
Sunak, who was chancellor when the government spent around £140bn on business support, says the pandemic forced ministers to move quickly and “put together support schemes for business” in a rush.
That support included furlough, grants and other aid designed to keep firms going through the crisis. At the time, Sunak said the government would do “whatever it takes” to support jobs and businesses.
Now, though, he says he worries those emergency measures may have “kept weak firms alive” for longer than they should have been.
“Had these interventions upended the natural processes of the economy? I fear they did,” he writes.
Sunak argues that the economy works best when failing businesses are allowed to go under and stronger ones take their place.
He calls that process “creative destruction”, describing it as the idea that “failing fast and trying again is a necessary part of entrepreneurship”.
Sunak says the United States has done a better job of that than Britain, because America is more willing to see firms go bust and be replaced by more dynamic competitors.
By contrast, he says the UK has too many “zombie” companies — firms that are only just making enough money to pay their debts.
Sunak says that means money, workers and investment are being tied up in businesses that are not really growing, rather than moving to stronger ones.
He also says Britain is making the problem worse with policy choices, including the Employment Rights Act, which he says has “undermined our flexible labour market”.
His message is: Britain should stop trying to save every business. “We should be happy to see the most efficient ones flourish while the least productive ones wither.”
Sunak ends with an even starker warning: “We must learn to love creative destruction or see our economic power destroyed.”