JAMES Anderson, manager of the £2.7 billion Scottish Mortgage Investment Trust, has described the UK's political and economic leadership as "deeply lacking" and "profoundly frivolous".
Mr Anderson, who declared that the UK economic environment was "dire", yesterday warned about the influence which the City of London exerted over the country's political leaders. And he highlighted the dangers of any exit by the UK from the European Union, following Coalition Education Secretary Michael Gove's statement that he would vote for the country to leave the EU if a referendum were held now, a view backed by his Cabinet colleague Defence Secretary Philip Hammond.
Mr Anderson, who is among the UK's most respected fund managers, also took issue with the short-term view of global stock market players who did not like companies investing for future growth at the expense of immediate profitability.
Commenting on the UK, he said: "If you look at the domestic economic environment – that I do regard as dire, and the leadership, be it political or economic, seems deeply lacking and profoundly frivolous."
Asked what he regarded as the main problems in the UK economy, Mr Anderson, a partner in venerable Edinburgh investment house Baillie Gifford, replied: "I think the single dominant one is still the extraordinary mental dominance the City of London exerts over our economic policy-making.
"I don't believe - that the business model of the banks has become transparent; has become simple rather than complex - They have slightly more equity. To believe that the fundamental problems of the British financial system have changed is hard."
Mr Anderson contrasted the culture in the investment banking sector with that in UK companies such as engineering group Rolls-Royce and technology company ARM Holdings, which he said "appear to be managing themselves more seriously and appear to be more competitive for the long run".
He said: "I think the dominance of the City of London over the mentality of our political leadership remains worrying."
And he was unimpressed by former Conservative Chancellor Nigel Lawson's call last week for the UK to leave the EU.
Mr Anderson said: "You read about what Nigel Lawson says about wanting to come out of Europe. It is really about protecting the City of London from regulation. I think it is profoundly frivolous to blame Europe for the problems of our economy, or think exiting Europe would solve the problems of our economy."
Asked for his view of what would happen if the UK were to leave the EU, Mr Anderson replied: "I think, in the long run, it would be deeply depressing. I think you would [increase] the dominance of the financial sector and the worst part of the financial sector, the investment banks. I think you would thoroughly discourage global companies from making Britain a significant base because I do not believe our domestic market is large enough to justify them coming here on that alone. I think there are bound to be fears about access to European markets."
Assessing the chances of the UK leaving the EU, Mr Anderson said: "I think it is a possibility because of the political pressures on the right, as well as the influence the financial sector has on the economy."
However, citing his belief that policy-makers and influential figures in the US would tell the UK they were "profoundly against" such a move, and declaring this stance was pretty clear already, he added: "I suspect it [EU exit] won't come about, ultimately."
He called for moderation of the UK Government's fiscal austerity programme.
Mr Anderson said: "Austerity, from the perspective of cutting current expenditure, is to my mind counter-productive. I think we are increasingly learning that."
Viewing the UK as isolated in policy terms, he asked: "Austerity for the sake of it – is it being pursued anywhere other than Britain now?"
He believed "tail risks" from the eurozone debt crisis had diminished significantly, citing a fall in market interest rates in "peripheral" European countries.
He viewed the investment climate as "quite encouraging" but considered it odd that people were focused on buying shares in companies perceived to be safe.
Mr Anderson said: "The great danger of that, the message companies are taking from that, is you shouldn't invest because, if companies say they are investing for future growth, the markets don't like it at all. That is pretty much everywhere in the world."
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