Lord O’Neill says Tories have one last chance to level up Britain


Jim O’Neill is not a man to mince his words. The one time chief economist at Goldman Sachs and former adviser to two Prime Ministers says the Tory Party is running out of time to win the hearts of voters in the North of England. 

Those who switched from Labour in the last Election are still waiting for proof that ‘levelling up’ the regions economically was not just an empty promise. 

Speaking just 11 days before Chancellor Jeremy Hunt will make one of the most pivotal Budget statements in decades, he says: ‘This is the last chance saloon for the Red Wall vote. If the Conservatives get this wrong it will be too late and a gift to the Labour Party.’ 

Northern soul: Lord O’Neill’s investment vehicle Northern Gritstone has £215million to invest in Northern firms 

Lord O’Neill is arguably better qualified to make that judgment than many. The Manchester United fanatic – he once even tried to buy the club with a consortium of investors – worked with David Cameron and Theresa May. He was one of the main architects of the Northern Powerhouse – a body set up by the Tories to boost economic growth in the North. 

More recently, he has set up an investment fund to back firms that could boost commerce and create jobs in those very areas that have lagged behind London. 

O’Neill concedes Hunt’s hands are tied as he looks to fill a £50billion hole in the nation’s finances. But he says the new Chancellor must make some investment promises to boost hard-pressed areas. 

‘There has to be some ambition or we’ll never get out of this low growth trap. There needs to be more emphasis on skills and investment.

‘The investment allowances should stay while the Government needs to make it easier for pension funds and insurers to invest in early-stage funds and companies,’ he says, referring to schemes like the annual investment allowance which gives tax relief for businesses ploughing money into new plant and machinery.

Levelling up was first used in the Conservative Party manifesto in 2019 and was a policy aimed at reducing the imbalances across the country. But Covid and a series of self-inflicted Tory disasters have pushed the policy down the agenda.

O’Neillis hopeful the Tories can pull it out of the fire, after the disaster that was former Chancellor Kwasi Kwarteng’s Budget in September which left the UK’s finances and the bond markets in the doldrums.

‘Never in my professional life have I ever seen anything like it. He announced unfunded tax cuts without forecasts from the Office for Budget Responsibility. It was frightening naivety. 

‘But the adults are back in the room and I’ve been impressed with Hunt. I hope he doesn’t disappoint me.’ 

So far the signs are mixed from Prime Minister Rishi Sunak who has publicly backed levelling up – but so far failed to voice his commitment to investment zones or the HS3 link between Leeds and Manchester. 

This annoys O’Neill whose top priority these days is to solve the productivity gap between the North and the South. The 65-year-old believes one of the answers is to have the cities of Manchester, Leeds, Sheffield and Liverpool come together and become one economic zone.

He wants the area to be like America’s West Coast, in particular San Francisco Bay, giving the UK much-needed growth at a time when the nation so badly needs it. 

O’Neill points out the unique geographical location of these four Northern cities, explaining that at their furthest point they are only 80 miles apart. At the very least Liverpool and Manchester should be a Dallas/Fort Worth-style metroplex. ‘If you look at the whole area, radiating around that part of the North you’ve got eight to nine million people.’ 

He concedes there is a brain drain to London; he himself ‘a proud Mancunian’ is typical of that. But he says: ‘If you can create a single economic market in that zone it is another London. If you could pull that off it would raise the national growth of the UK.’ 

Born in Gatley in the Manchester suburbs, O’Neill is a passionate Northerner who had been advocating levelling up long before it became fashionable. 

He is best known as king of the acronym, having famously coined Brics as chief economist at Goldman Sachs, putting Brazil, Russia, India and China on the map. 

He has no airs and graces, is physically trim and his conversation is littered with references to Manchester United. He spectacularly fell out with Theresa May in 2016 and resigned. ‘She liked the idea of doing more for tough places but was really against the Northern Powerhouse because it was George Osborne’s, which was sort of stupid.’ 

He is dismissive of how the Tories are currently selling levelling up to the public – ‘slogans, no real substance and depth’. 

Because there has been so little progress in levelling up the country, the policy has become increasingly fractious, particularly for Conservative voters in the South. 

O’Neill knows this, saying: ‘It is portrayed as all at London’s expense and the Mayor of London quite frequently publicises that fear. But this is not going to harm London.’ 

He is equally critical of Northern politicians who fail to match his ambition and ‘have the attitude of poor little me in the North, what about me in the North’. 

Fed up of the political classes and their inability to spur private investment to the North, O’Neill has gone it alone. 

His latest project called Northern Gritstone is an investment vehicle looking to support companies emerging from top Northern universities which only attract a minuscule proportion of the money that otherwise goes to the ‘golden triangle’ universities of Cambridge, Oxford and London. 

Northern Gritstone is backed by a host of big-name pension and investment funds including M&G and Columbia Threadneedle. It has £215million to invest and has already identified 140 possible opportunities. The group has backed three companies so far. 

One of its investments is a company called Iceotope which cools computer servers by using liquid rather than fans. We are at the company’s headquarters in Orgreave, on the outskirts of Sheffield, the site where 40 years ago steel workers clashed violently with police at the height of Margaret Thatcher’s crackdown on the miners strikes. Staring out the window at the vast open valley, O’Neill says: ‘I took Osborne here when he came to Sheffield. I said to him, ‘Do you know where this is.’ I told him, he couldn’t believe it – his mouth dropped.’ 

It is now a high-tech business park, housing Iceotope as well as Rolls-Royce and McLaren nearby. 

In the presence of the company’s board, O’Neill is in full Goldman Sachs mode. As an Iceotope company director prepares to go through his 100 or so prepared slides, O’Neill cuts in swiftly – all he wants to know is how and when they are going to make any money and if he can see the product. 

We are duly whisked down to the factory floor where the young engineers are hard at work. O’Neill becomes genuinely animated and their enthusiasm has rubbed off – justifying to him that his latest cause is not in vain. 

‘I want to see Iceotope employing hundreds of people in South Yorkshire earning really good incomes. That to me would be enormously gratifying and real vindication of what Gritstone is all about.’

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