ONE of Scotland's top fund managers has declared the "tragedy" of the era since Margaret Thatcher came to power has been that the notion of entrepreneurial freedom has not translated into creating great companies.
James Anderson, manager of the £3.7 billion Scottish Mortgage Investment Trust, cited his belief that a key reason for the UK's failure to produce significant numbers of great companies was that people were attracted by opportunities to make money more easily and quickly by going into the City.
The fund manager contrasted the UK's failure in this context with the success of China, which he declared had created three of the world's largest internet companies.
He listed these as online marketplace operator Alibaba, internet service portal Tencent Holdings, and search engine Baidu, huge companies in which Scottish Mortgage has major stakes.
Mr Anderson is a big-hitter on the Scottish, UK and international fund management stages. Scottish Mortgage is the largest conventional investment trust in the UK, and has tens of thousands of shareholders. It has turned in strong investment performances in recent times, partly by focusing on technological change.
Asked about the outlook for the UK, Mr Anderson replied: "The tragedy, from that point of view, is we still find it quite difficult to see many great companies rising."
Referring to the period since 1979, the veteran fund manager said: "What I would say is that the tragedy of the entire post-Thatcher era is this notion of creating entrepreneurial freedom hasn't translated into us producing great companies."
He cited telecoms giant Vodafone as a UK-based company of scale that had been built up during this period. However, he pointed out that Vodafone had been built by combining assets through mergers and acquisitions and by expenditure of capital, "rather than any great inventions".
Mr Anderson said: "Are we creating great companies? I thought that was the purpose of finance, rather than finance just becoming bigger in itself."
He declared that he was "not convinced" that the UK was creating great companies.
Mr Anderson said: "I am not at all sure that trying to persuade HSBC and the likes to stay in Britain is really what we should be aiming at.
"What would [Chancellor] George Osborne say if you asked him, 'Why haven't there been more great companies produced in the era since 1979?'."
Mr Anderson added: "I fear it is a classic answer. The people go into the City, rather than have the patience and the hard life."
He pointed out that it might take an engineer with a big UK company about 20 years to get to be in charge of a factory in the likes of north-east England.
Mr Anderson asked: "Is that of any great allure, compared with the City."
He highlighted his belief that semiconductor and software design company ARM Holdings, one of Scottish Mortgage's top 30 holdings at March 31, was a great company.
However, Mr Anderson added that it was a "pity" ARM Holdings was "not an even greater company" given the importance of the microprocessor specialist's technology.
Mr Anderson expressed disappointment over the large trade gap, poor productivity, and low business investment in the UK.
He said: "I think it is very disappointing. In a sense, why would you expect productivity to improve unless there is much capital investment?"
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