Could coronavirus finally lead to nationalisation across British businesses?

The fallout could turn the UK into the world’s largest socialist major economy – and under a Conservative government, writes Sean O’Grady

Not even Jeremy Corbyn and John McDonnell could have dreamed of such a massive extension of state control (PA)

It feels strange to say it, after all we heard from him about the wickedness of socialism during the election only a few weeks ago, but Boris Johnson may be able to preside over the greatest programme of nationalisation since Lenin dispatched the Romanovs. How will this come to pass?

The mechanism is simply stated, and fairly obvious when you come to it. First, the coronavirus destroys the revenues of a whole range of enterprises, large and small. The small ones may, just about, be kept afloat through a combination of layoffs of staff, postponed tax bills, business rates relief and government-backed loans.

Still, there may be a major restructuring in some sectors, pubs for example, and the British high street and a way of life may end up altered for ever. For smaller businesses, as we saw in the Budget, there is some sort of a plan.

But for the larger concerns? Not so much. There is an assumption that they can look after themselves. True, some will be able to tap up their shareholders to subscribe for some more shares, if they have faith in the long-term future of their business.

With the amount of easy money – “liquidity” – the Bank of England and the Treasury are pumping into the financial system, they might also be able to get their hands on some bridging finance, until things get better. Of course they will still need to shoulder losses, even if they cut suppliers and jobs; but there is the chance of seeing things through under their own steam.

But what of the ones who cannot? How do you respond when the likes of Richard Branson, of all people, are pleading for state aid? These could be “British” firms in the sense of being based and operated here; or they could be, increasingly likely, internationally focused companies based here or elsewhere. Either way, the principle is the same; the taxpayer needs a good deal.

This is the second element of the mechanism; where there is no private sector money available, and the business needs to keep alive for the future (for whatever reason), then the default is for the British state to take it over: so we nationalise these businesses, or their British arms and operations.

There is no fairness in having the taxpayer simply hand many millions of pounds to Branson, or anyone else, just so they can keep going. All that does is allow business to “privatise” its profits while “nationalising” its losses. That is not how market economies are supposed to work.

If there is no other form of finance available, and the taxpayer is the last resort, then we should get something for our money – a stake in the business. It’s like Dragons’ Den.

Branson comes in and asks for so many million quid; ministers respond by duffing him up, then offering him what he wants, but demand a 51 per cent stake in his airline, say. It’s just business, and is what was done when the banks were rescued in the financial crisis of 2008-09.

There is a wide swathe of British commerce and industry that could be seeking such rescues in the coming months. Although it has said it does not want it, British Airways could conceivably be nationalised, if it is simply in charge of a grounded fleet of planes and crews doing precisely nothing for the next year. In which case, the British taxpayer might find themself the proud owner of BA, plus Aer Lingus and Iberian, all part for BA’s parent IAG plc. That would, for good or ill, reverse one of the 1987 flagships of the Thatcher era.

It could be followed by the nationalisation or part nationalisation of a vast array of other enterprises – the private health sector (because of emergency demands), bus and train operators, pub groups, smaller airlines, hotels and restaurants, travel companies, even football clubs and cruise liners. Not even Jeremy Corbyn and John McDonnell could have dreamed of such a massive extension of state control. And all that on top of the biggest public borrowing spree in 30 years.

Of course the idea would be that the whole lot could be sold off, at a tidy profit, once the economy and the financial markets return to normal in, say, a year’s time. Alternatively, we just settle down to living in the most socialist major economy in the world, and under a Conservative government. The Tories have always been skilled at reinventing themselves for new times, but this would be very strange indeed.