High stakes lobbying is back as Government rescues FlyBe
Since the onset of the financial crisis and recession in 2008, the UK Government has either been too weak to act decisively or had little money to spend. This changed in December 2019, but it’s hard for CEOs and lobbyists to forget their experience of the last 11 years.
The Government’s reaction to FlyBe’s impending collapse shows us all how different the next five years will be.
In a deal with FlyBe’s shareholders, it seems that the Government has agreed to defer over £100m of Air Passenger Duty (APD) owed by Flybe, possibly also lent the company money and announced a review of APD, as part of a wider review of “regional connectivity”. In return, FlyBe’s shareholders – Cyrus Capital, Virgin Atlantic and Stobart Group – agreed to inject a further £30 million into the company, following the £100 million they reportedly committed to “save” FlyBe in January 2019.
The move has been greeted with howls of derision from rival airlines.
Ryanair’s Michael O’Leary said the deal “breaches state aid and competition law” to help an airline that is “a billionaire boys club” that will “undoubtedly fail” in future without subsidy. British Airways owner IAG has complained to the European Commission that the bailout is a “blatant misuse of public funds”. Easyjet CEO Johan Lundgren said, “Taxpayers should not be used to bail out individual companies, especially when they are backed by well-funded businesses.”
Rail operators expressed similar views and environmental campaigners are also furious. Greenpeace described the policy as “poorly thought out”; Friends of the Earth said that any plans to cut APD would be “completely unacceptable and reckless”. The rescue may yet not happen as the acrimonious lobbying continues.
Since the election the FTSE-100 is up around 6% and the “Boris bounce” is freeing investment that was previously delayed.
The UK remains the world’s 4th most attractive market (after USA, China and Germany) according to PwC and it is “increasingly attractive” to European CEOs. However, the Government’s reaction to the FlyBe situation should also be a wake up call to CEOs and businesses across the UK. This Boris Johnson Government is not a traditional Conservative regime reluctant to pick winners and losers – and averse to saving lame duck businesses. In fact it may not really be “Conservative” at all – rather, a Government without any strong ideology that is more concerned with being popular. It will certainly be interventionist and is capable of acting very quickly and being bold.
Its 4th January announcement “Housing Secretary calls on landlords to make it easier for responsible tenants to have well behaved pets in their homes” shows quite how interventionist and populist it will be. The media will occupy an uncertain position in this parliament. It seems that Boris’s team will refuse to despatch ministers to the Today Programme, while simultaneously acting quickly to court popularity with the Telegraph, Mail and Sun.
This craving for popularity – combined with a high level of rapid intervention – means that they will make mistakes and fail to think things through. There will be many unforeseen consequences as a result of Government action. It may also be a regime that rewards its friends and bears a grudge, further complicating the picture. This Government will therefore offer huge opportunities to some businesses and pose a considerable threat to others.
We are suddenly living in an age where influencing policy could be business critical to many companies.
In the next month, businesses and organisations need to put their “influencing policy” programmes on a war footing. Call it what you will – Government relations, public affairs, lobbying – but it has suddenly become vital. The crucial date is mid-February when the promised reshuffle happens and the key figures for the next period become clear. The areas we know to be crucial include : Infrastructure; pensions; housing; health and social care; transport; energy; regional support; climate change; social mobility. But the Government will also surprise us.
Whatever else this Boris Johnson Government will deliver, and already there are many positive signs for business, one thing is certain – high stakes lobbying is back.
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