Firms need to invest and create jobs - Bishop of Durham

BUSINESSES sitting on record-breaking piles of cash need to “find the courage” to take more risks and use the money to invest, grow and create jobs, the Bishop of Durham has said.

The Bishop of Durham the Rt Rev Justin Welby
The Bishop of Durham the Rt Rev Justin Welby

BUSINESSES sitting on record-breaking piles of cash need to “find the courage” to take more risks and use the money to invest, grow and create jobs, the Bishop of Durham has said.

Bishop Justin Welby, a former international oil executive, suggested companies have an ethical responsibility to seek out growth in order to “enable society to flourish”.

The Bishop, the fourth most senior cleric in the Church of England, has been struck by the revelation that the corporate cash holdings of UK businesses are at an all-time high of £700bn.

He said that placed a duty on the leaders of businesses to use that resource effectively to grow and create jobs, which meant “changing their risk profile” without being reckless.

“There is a massive challenge for business at the moment around its participation in the economic regeneration of our society, particularly in areas like this,” he told The Journal. “Basically companies are hoarding cash because of a lack of confidence generally and a lack of confidence in their ability to access credit if there is a very sudden downturn.

“They are keeping significant cash balances so that if we go into another 2008, where there is literally no lending, they don’t have to worry for a long, long, long time; not just for 30 days but for months and months.

“The reality is that, at some point, you’ve got to say, if we are going to grow out of this downturn it’s going to come from the only sector which has liquidity and that’s the corporate sector, and that needs leadership and at the core of that is the sense that the company exists to enable society to flourish not merely for its own purposes.

“Therefore, in the end, companies need to find the courage to take some risk in order to invest in viable good returns.”

Bishop Welby said there were “plenty of companies in the North East that are doing very well and are investing successfully” but added that more had to “play their part in the heavy lifting of the economy over the next two or three years”.

“It’s not about splashing out all of that money immediately but a commitment to invest funds and develop projects with a long-term view in the end has an ethical aspect to it,” he said.

“We have to invest in a way that creates employment and helps to make society a better place for the company to exist in over the next 10 or 15 years. Companies have the capacity to do that. They are much more powerful than individuals and, at the moment, they have got more money than Government. The corporate surplus is more or less equivalent to the Government deficit.”

He added: “All of the Bank of England surveys, especially those for this region, show that cash hoarding is a real issue. Go back to (American President Franklin D) Roosevelt in 1933 at his inauguration when he said ‘the only thing we have to fear is fear itself’. That can only be overcome by an act of will. You make up your mind that you are going to take a slightly higher-risk profile; I’m not talking about rashness.”

Bishop Welby said there were many outstanding examples of leadership from the business community in the region, such as County Durham businessman John Elliott, who has donated his family business Ebac to a charitable trust, as well as other firms such as Wallsend subsea machinery specialist SMD which is investing heavily to grow and create new jobs, especially for young people.

“They might not all give away a £30m company into a foundation but I do keep coming across people who are saying we are making an effort to take on apprentices and to develop the business because if we don’t do that, what kind of society are we going to be living in?

“The North East has seen some very serious investment over the last few years and some that’s coming in the next few years from major international businesses that are emphatically not doing it for reasons of philanthropy but because they are going to get a solid return on it. But it is very, very good for the society in which we live.”

Bishop Welby, who has been appointed to the parliamentary committee to review standards in banking in wake of the Libor-fixing scandal, was talking ahead of an address about business ethics to a small group of senior business and political leaders at the Shepherd’s Dene retreat at Riding Mill in Northumberland, organised by law firm Muckle.

He said that there were huge challenges ahead for the region and country as the economy slowly recovered, and it was important that the mistakes of the pasts were not repeated.

“Material and spiritual regeneration have to go together,” he said.

“We have to find a sense of value between the two. As a Christian I believe that comes from a trust in God that means as things improve that the spirit of God calls us into a stronger sense of community and caring for one another rather than just going for some materialistic and individualistic recovery.

“We need a new way of looking at things otherwise we’ll just repeat the cycle with the disaster that we had. The disaster in 2008 was unique over the last 150 years – this is a totally different kind of downturn because it started with the failure of the major things upon which our economy is based, ie the financial services industry.

“Therefore we need to find a new way of doing things that represents a new set of cultural values, otherwise the material regeneration will be built on very weak foundations. That’s a huge opportunity for the North East because I think we’ve got it here at some considerable depth.

“The cultural values also exist – they may be a bit latent – but the history of the North East is of very strong communities and a sense of looking out for one another because of the industries that were here.”

A year after moving to the North East from his previous role as Dean of Liverpool Cathedral, the Bishop admitted he had been pleasantly surprised with what he had found here.

“You find far more optimism and far more determination and success than you imagine,” he said.

“The trouble is that there are significant pockets of immense isolation from that. And that is a huge, huge challenge ... how to link up the areas where not much is happening.”

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