Britain Builds World-Class Companies. Then It Throws Them Away.

Ajouté : 2026-05-31

[00:00:00]Have you ever wondered why British companies don't turn into trillion dollar giants? This week, a company that makes memory chips became worth more than Astroenica, HSBC, and Shell put together. Micron. A year ago, it wasn't even a top 10 US company. Today, it's worth over a trillion dollars. We've never produced a company like it. I'm in the studio with Neil Woodford, who has spent 30 years as one of the largest shareholders in some of the biggest companies in the UK. This week, we're going to talk about how Britain builds worldclass companies and then throws them away.

[00:00:32]Neil, let's start with the obvious objection first. America is a far bigger economy than we are. Isn't that the whole story? They've simply got more room to build giants. Well, it's partially true. Of course, the US has huge scale and a huge home market. So, it has that competitive advantage, but it clearly is not just about scale. If it was about scale, you wouldn't have seen the success, for example, of TSMC, which is now a top 10 company in the world. um which was born and bred in an economy in Taiwan with a population 23 million. You wouldn't have seen the creation of Samsung and SKH Highix for example in in in South Korea which is a population of 50 million people. Those two companies are both capitalized at over a trillion dollars. Size is an advantage but it's absolutely not just about size. What is it then in your view? It's about a combination of factors. for example, you know, having the right technology, having a nurturing and supportive commercial regulatory environment, having a government that that understands the importance of an industrial policy, for example, and and supports its key industries and companies. Uh it's about having the right type of regulation. It's making sure that you don't overburden companies with excessive regulation. It's also about uh access to capital. It's also having the right people, the right visionary people, but it's also about creating the environment in which the right people can thrive and prosper in the right businesses. Uh it's so it's also about corporate governance. It's about it's about the politics of corporate governance. All those things are also relevant.

[00:02:17]>> There is an ownership point as well. So some of the biggest US companies are founder led and founder controlled run by the same people for decades. Is that a factor?

[00:02:25]>> Yeah, absolutely it does. Yes. In the UK, the average tenure of a CEO of a Footsie 100 company is under four years.

[00:02:32]I I looked at the US uh the top 20 companies in the US by market cap. 12 of them have effectively a joint CEO and exec chairman role. So the same person is those fulfills those two roles. Um you could never have that in the UK.

[00:02:50]It's not against the law in the UK but the cor corporate governance sort of uh regime it argues very clearly that that is frowned upon. Um and and I couldn't see any company really overcoming the sort of resistance that it would get from shareholders, from corporate governance sort of norms that would prevent that happening.

[00:03:15]So in the UK, if you looked at the median tenure of Footsie CEOs, Footsie 100 CEOs, it's less than four years. The UK doesn't explicitly prevent its corporate governance norms do not explicitly prevent um CEOs having a long tenure but it is definitely frowned upon and it it just really interesting to me to understand why is the lesson from the US where founders with vision who may well have you know be a bit shouty from time to time why is it that the US corporate system allows those people to thrive and prosper and have very long tenures at the helm of their businesses which they can build to become giant companies. Why do they do that? And we in the UK frown upon that sort of outcome.

[00:04:06]>> You don't have to look very far for proof of how fast the top of a British company turns over. So BP this week had their third chairman in three years removed by his own board. Neil, what do you make of it?

[00:04:16]>> Yeah, I think it's a classic example of what's wrong with the UK's corporate governance. uh environment really BP one of the UK's biggest most important businesses has been going through a difficult time clearly um over the last five or 10 years it's had three chairman and three CEOs in three years it's ridiculous you I mean people talk about the UK being ungovernable BP is clearly at the moment apparently ungovernable what's interesting is that is that the the non-exec directors who got rid of the the in the chairman uh this week they've been in place broadly as the same team for about three or four years.

[00:04:55]There's been one or two new additions.

[00:04:57]The CEO is new. The chairman bought the new CEO in and there's one new non-exec director uh on the board, but most of the board have been in place uh throughout this period when they've been literally hiring and firing CEOs and and chairman uh uh like they change their underpants. And it's ridiculous. It is really ridiculous. And it would appear that that um this chairman has been ditched despite the fact that he has been effectively the architect of the turnaround strategy of BP. Despite the fact that he was the person who bought the new CEO in they got rid of I don't know all the details. It's all a little bit shrouded in secrecy understandably because it's going to this is definitely going to turn into some sort of litigation. But um what appears to be the case is that they got rid of him because he was a bit shouty.

[00:05:49]I I may be being a bit flippant there, but you know, it would appear that he was a bit dictatorial. He was a bit like I imagine many of the corporate captains of America have been for the last 20 years as they've steered companies like Microsoft, Apple, Amazon, Meta, Nvidia towards the success that they've achieved. So, um, it's really odd. We have a very very different way of of of sort of perceiving corporate governance and leadership. Neil, there are plenty of times throughout history that you haven't been watching this from the sidelines. You owned many of these companies, huge stakes for years. Let's start with Glaco. Take me back to the beginning. How how big were you in Glaxo and for how long?

[00:06:34]>> Yeah, so I I I owned Glaco through a long period of my fun management career.

[00:06:39]I probably was in the top five for at least a decade. I'd been a shareholder in Glaco and in Smith Klein Beach before they merged and then of course they came together I think in the late '9s uh and then owned the the the merged entity for a long period of time and became a very large shareholder um in Glaco as a result of that.

[00:07:00]>> And what was your thesis for holding it?

[00:07:02]Why did you believe in that business?

[00:07:03]>> My my overriding philosophy throughout my fund management career was one based on valuation discounts. So I was looking for companies that I thought were undervalued. Um for me Glaco was an undervalued business, but it was also a business that was in my view run suboptimally. It had a suboptimal structure and I had long argued that Glaco needed to change and do some fairly radical things to improve its performance particularly after the merger uh and after it had settled down and and a relatively new leadership team had come in. Um, I tried to impress upon them over a very long period of time and argued, I think pretty coherently why the company needed to to be organized differently. Effectively, Glaco Smith Klein or Glaco as it became was really a a bit of a conglomerate. My experience throughout my career was that complicated businesses, excessively complicated businesses with lots of different divisions, lots of different activities become incredibly difficult to run. Well, I was a great believer in focus uh management teams focusing on what they were good at and streamlining businesses to focus on a limited number of activities and being excellent excelling if you like at a limited number of things that they did well and not trying to be the sort of jack of all trades. And in many ways, Glaco was that sort of conglomerate really. It had um for example like it had a consumer products business effectively what's called a sort of household products business. So it owned Lucasade. It made toothpaste. It manufactured Holix. But alongside that it was developing drugs to treat cancer. Now there is no no synergy whatsoever between those sorts of activities. And my view was separate them. Separate them and get better at doing those two things separately. And so you pushed for it for years and you presumably had meetings with the chairman, with the CEO. I did exactly that. Yeah. I had uh one-on-one meetings with the with the the CEO. I had I met the CEO frequently and impressed upon him um why I thought this was the right thing to do. I wrote a paper which argued the case. I sent it to the chairman. At no stage did they really say, "No, no, no. We completely disagree with you."

[00:09:26]uh they pretty much said yes there's some some interesting points but we don't think it's right for Glaco right now you know maybe that might be the sort of destination for the business but not not right now uh they didn't really give me a proper reason why it wasn't the right thing for the company to do now and what I learned through that process and what I learned through my career was that boards of UK companies find it really hard to do radical things. They're inherently excessively conservative.

[00:10:00]Maybe it's a product of of of the fact that they spend way too much time on governance, compliance, DEI, ESG, etc., etc., etc., and far and nowhere near enough time on the strategy of the business. The tenure is typically too short. um they there is a sort of reasonably strong correlation between the scale of a business and the remuneration of its key executives. Um, so there is this sort of disincentive to to sort of shrink to grow strategy which was what I was advocating at Glaco to create two smaller entities to separate them and to go allow those businesses to go their separate ways and and I think Glaco's strategy was very confusing at the time. So for example, Glaco, which at one stage had been a leading oncology business globally, a leading oncology business, sold its cancer business uh in about 2014 and within a few years had gone back into the cancer business by buying a um Tasaro for for over $5 billion. So I mean the strategy was all over the place, frankly. um there wasn't a clear vision about what the company needed to do and it changed too frequently and they didn't really grasp the nettle um that they needed to grasp early enough.

[00:11:24]What does it actually feel like to be that big of a shareholder and still be ignored?

[00:11:29]>> Well, it it sort of teaches you a few things. It's quite frustrating and and of course bulls are in a very good position to sort of divide and rule. So, for example, they'll you'll have a meeting and say, "Look, I I think this is clearly what you need to do for these reasons and and you can argue as as persuasively as possible, but the board don't really want to do it the thing that you're asking them to do." They often did and do still, I would imagine, say to the shareholder, "Well, you say that, Neil, but you know, our other leading shareholders say something different and would want us to do or not to do that and do this." Now, of course, that's very hard for an individual shareholder to to verify because shareholders have a habit of not talking to each other. It's really really unusual for uh shareholders to to to pick up the phone and and speak to each other about the strategy of a company that they may hold in their portfolios. In fact, some of the most awkward conversations I ever had as a fund manager were with the fund managers of other funds that held the same company as me. Sometimes you can get together and talk about things u particularly when there's a bid on the table or where there's some sort of transaction which you've got to make your mind up on. Sometimes it's possible to talk to other shareholders, but the rules and regulations make people very very nervous. They worry about concert parties, about breaking the law, about all sorts of sort of breaches of regulations. So typically shareholders are in sort of hemetically sealed buckets and they don't tend to talk to each other. So they can't really form a coalition view. What's superseded that to some extent is the arrival in the UK of activist shareholders like Elliot who explicitly have an activist agenda, had the infrastructure to deliver an activist agenda by relatively small stakes in large companies and really shake the place up. But they have the skill set to do that and are and have the courage and the ability to talk to other shareholders to sort of coalesce around their particular argument. Normal institutional shers don't have that infrastructure and definitely are discouraged from doing that.

[00:13:41]>> You ran out of patience with Glaxo and sold in 2017. Yeah. I remember working on the investor coms that we published to the investors in the fund at the time. But it's what happened next that I thought was quite interesting. Glaco did eventually do the thing that you'd been asking for. They spun off the consumer business into Haley, but not until 2022, 5 years after you walked away and under a different chief exec.

[00:14:02]>> Yeah.

[00:14:02]>> Now, since that split, Glaco shares are up about 10%. The add in the dividends, you're up about 24% over the nearly four years. The consumer half is up about 15% in total over the same stretch. So, Neil, were you right that the business should separate and were you right that you should sell at that time? I >> think I was right that the business should separate. I think it should have separated earlier. The two businesses would have had a longer runway to succeed as more focused entities. The problem certainly for the farmer business is is that the damage was done to the farmer business by a prolonged period of underinvestment and and by a prong period when it became the thing within Glaco that really had underperformed was starved of capital um and repeated late stage uh uh failures.

[00:14:50]drugs that had gone through, you know, a discovery process and a and a and a clinical trial process failed. A number of high-profile drugs that had taken billions to advance failed at, you know, at phase three, for example. And I think that shattered the confidence of the company in in what was ultimately his core business. Um, so I think it waited too long really to to sort of embrace the need to change and separate. Uh and as I've said, it equivocated about being in cancer, being out of cancer, and going back in again. The long and the short is is the Galaxy has been a disappointing investment for a long period of time. It hasn't fulfilled its potential. It's separated now and has much greater potential to succeed now as two separate entities, but it hasn't really it hasn't demonstrated that success yet. It's some way off. So I was probably right to sell, right to advocate uh a separation but you know ultimately a disappointing investment. So Glaco is the one that got away but it isn't the whole story because when it mattered you also helped keep one of Britain's best companies in British hands which is Astroenica and 2014 FISA came for it. Walk us through what happened.

[00:16:05]>> Yeah so I had been a very very big shareholder in Astra one of the biggest shareholders in Astra. that was a company that did actually listen to its shareholders interestingly and had I think embraced the reality that that its leadership had had had been too timid. I sort of I think played a h played a part made a very small part probably in persuading the chairman of the board to sort of get new leadership in. In the end that happened. Pascal Sorio came on board as the new CEO. Uh I was very excited about him. I thought he'd be a great CEO. He is still now the CEO many years later and has done a fantastic job. Soon after he came in as CEO, FISA launched a a bid for the company and uh my view was even though the price on the screen was quite an attractive premium over the prevailing price uh I think it was about £55 a share as a takeout valuation. My view was that's an attractive price today, but based on a medium and longerterm view of what I think Astroena can achieve, I think that would be a mistake for shareholders to sort of sell this business out. and I quite publicly resisted the bid and and supported Astroenica's independence and and gave them my view is that they should reject the bid which I think they they had already done but supported the the board in rejecting the bid. Anyway, long story short, the company remained independent. FISA's bid fell away and Astroenica share price is about £140 a share. It's been a very good investment and a very successful company and a very important company for UK PLC obviously >> and it's the UK's biggest drug maker. Uh so that one I think you definitely called right. But let's try and pull the thread together for people. So we've got Glaco Astroenica. You've been doing this for 30 years. If someone watching this wants to learn how you judge a company, what should they be looking for? I >> I'm a great advocate of of what Warren Buffett has said here historically.

[00:18:13]First of all, you've got to focus on how good is the business. the business normally wins out. So a good business can survive a poor management team and a poor B. Often bad businesses take down great management teams. So so it's the quality and fundamentals of the business that matter the most. But then in order to get the most out of a good business, you need a great team at the helm. And you need that team to understand the business really well. Uh and to make the right long-term strategic decisions about the direction of the business, what what it's to work out what it's good at, what it's not good at, and to focus on on on the really strong points of the business.

[00:18:55]And you know, I can think of no better example of that than than Simon Wilson and his long tenure at Next. He's been arguably Britain's leading CEO in my view. uh he's been incredibly good for the for that business. He's transformed the business. It's been incredibly successful. It's really prioritized returns to shareholders, but in so doing, it's done all the right things for its customers. I mean, it it's just a great example of what should happen and there are many many examples unfortunately of what shouldn't happen.

[00:19:28]>> Neil, I remember talking to you 18 months ago when you were screening hundreds of companies, going through their websites. I know many of them you couldn't tell from the company's website what the company even did. Is that something that you pay attention to?

[00:19:40]>> Yeah, it is. It's very weird. Some people might think that was a silly thing to do, but but um when you're when you're researching a a whole series of businesses, the first thing you want to do is to get an idea of what does a business do? How well does it do it? How well does it communicate to its shareholders and potentially interested investors? How well does it communicate with them with them? How clear is it about what it actually does? And in that search, I looked at hundreds of companies and and it was a revelation in some respects because so many companies can't even explain what they actually do and they're so consumed with political correctness. Some companies I fortunately I think the tide is turned on this but there was a period in which companies were so obsessed with political correctness with things like DEI um ESG um and all the other sort of governance compliance and and and and other sort of value destructive crap that frankly preoccupies boards. I mean I I did a search recently. What percentage of board's time was taken up with things like governance issues, DEI, ESG, compliance, regulation, etc. It looks like UK boards spend at least 50% of their time dealing with stuff like that.

[00:21:02]When you consider how complex and how demanding it is to run very big businesses, when you're when you're taking up 50% of your time dealing with issues that don't really add value to the business, but is are are largely sort of administrative, frankly, ask covering exercises. when you're only devoting 50% of your time to the things that really matter in terms of creating value for the business, for its shareholders, for its employees, uh for all of its stakeholders. It's no surprise that that companies underperform and underperform their international peers. We shouldn't really be that surprised in the UK that we are drowning as an economy in an overregulated administrationheavy economy. really regulation has exploded in this economy over the last 20 25 years. It's no surprise that companies have been affected in the same way and they too seem to me to be drowning in excessive regulation. And coming back to the sort of the key question, what is the thing that differentiates the UK from its developed economy peers?

[00:22:09]Why is the UK not developing its great intellectual capability into scale technology businesses? And I think the you you you look need look no further than the two things I've highlighted in the past which is access to capital the failure of the finance industry in the UK to back science and technology in the UK and you have to look no further than the excess excessive regulation that exists in the UK too and and are not fitfor-purpose governance regime. You mentioned Micron in your AI picks and shovels thesis at the end of 2024. Did you look at that company with the same lens?

[00:22:49]>> Yeah, I did. Yeah, I did some background research on what the company did, what it what it was good at, what it wasn't good at. It's a pretty simple business in some respects in that it's a very focused business. It's it's a memory chip manufacturer. Uh, and there are only a few of those of global scale um around the world. I then had to understand the sort of slings and arrows of the semiconductor cycle which is a notoriously cyclical industry. Micron interestingly has the the same person is the chairman and CEO of Micron and that company has done incredibly well recently in exploiting its position in the uh semiconductor industry and particularly in relation to the sort of next generation chips which are these high bandwidth memory chips which it and he for a period dominated. Samsung is now uh another supplier of those HBM chips which are used in data centers and used in the across the AI industrial revolution. But the fact is that that Micron as a traditional manufacturer of NAND and DRAM was one of the first chip companies to to develop HBM chips along with Heinix and those two companies were able to successfully exploit that that lead. But you know Micron was a relatively easy company to understand.

[00:24:08]It was very clear about what it did and what its strategy was, it sort of ticked all the boxes when I when I did that init initial analysis.

[00:24:15]>> So that doing one thing and doing it well and then communicating it clearly.

[00:24:19]Yes. That tells you something about the management team and the way that business is going to be run. Is that the idea?

[00:24:23]>> Absolutely. And one thing I'd have to ask you because after all of this, after all of the boards that wouldn't listen after, you know, more than 30 years of doing this, are you still optimistic on Britain and its ability to produce that kind of trillion dollar worldleading company?

[00:24:39]>> Uh, no.

[00:24:42]No. I I just I think it's an impossible dream. Look, you know, I'm optimistic on on on what Britain can achieve. I think Britain has got some amazing competitive advantages. I think first and foremost would be its technology prowess really that resides in its leading universities. We punch above our weight in terms of our ability to generate groundbreaking technology. What we lack is the ability to translate that into scaled commercial success. But that can be put right relatively easily. It's not a difficult thing to solve for. You just need a bit of political will to solve for it. But anyway, we have the the most challenging thing is is that we have that intellectual technology base here in the UK in in some key areas. And people like Jen I mean it's don't if you don't believe me, don't take my word for it. I mean, just listen to what people like Jensen Hang said about our technology infrastructure in the UK.

[00:25:42]It's outstanding. It's probably second only in the world to to the US. I mean some people might argue second or third to the US and China but but you know certainly we punch way above our weight in that technology prowess but what we aren't able to do and haven't been able to do traditionally is to translate that into scale commercial success. So that's one issue. The other the other of course is is that I'm optimistic about the outlook for the economy because I think it's an economy that's that's been sort of held back by a series of extraordinary events really when you look back over the last five or six years by COVID by the war in Ukraine by by the Gulf conflict now by by poor political leadership etc and by the wrong sort of policy decisions. But but despite all of that, I think the economy has the potential to grow much more strongly and to and to achieve um much better outcomes than than anybody today seems to believe in. It's not Shangrila by any means. I just think it's a lot better than people think. If we can solve some of those structural issues, if we can deregulate properly, if we can put the right economic policies in place, if we could get an industrial policy in place, if we could get capital flowing to our technology sector, that would would give me a lot more confidence about our longerterm future.

[00:27:06]But I I am not optimistic that in the near term we have the potential to translate really exciting young technology companies into scaled billions of dollars companies, trillions of dollars companies. Uh that that's not going to happen anytime soon.

[00:27:22]>> But are Britain's unloved world-class companies an opportunity right now?

[00:27:26]>> Yes, because they're so cheap, because they're undervalued relative to their peers in other economies and other markets. Even BP for example looks very cheap relative to its peers. I mean it's going through a corporate sort of governance disaster at the moment. I mean it makes our political situation look look calm and considered but you know there's there's huge value in in in BP and I wouldn't be surprised if somebody comes along and bids for it. I mean Shell has apparently been rumored to be interested in it in the past but it's a sitting duck now. really frankly it has no proper leadership >> and you mentioned next as being an example of a company that you admire and that talks about itself in a clear way.

[00:28:11]>> If I had an imaginary situation where I was advising corporate Britain on what to do to develop its skill set to become better corporate leaders to um deliver more value over the long term. I would suggest that all of them pay attention to Next and how Next has managed its business, how Next CEO has communicated so clearly, has been so transparent about its strategy, what it's doing, what's working well, what isn't working well, what it plans to do next, uh, and why it it communicates more clearly to its shareholders than any other company I've ever come across. And it isn't a simple business and it's been through an incredible transformation. Just remember um Simon Wilson has been at the helm of this business whilst retail has been through the biggest revolution it's ever been through.

[00:29:06]Retail has moved from being a sort of high street activity or an out of town activity in a shopping center for example to effectively a significant amount of that has shifted online and it's disrupted so many retail business.

[00:29:21]So many of next peers have been profoundly disrupted by that huge shift.

[00:29:27]It's had some some stormy seas on that journey but it's navigated it brilliantly. It's been a a business that has been challenged throughout that process. Arguably, arguably more challenged because fashion really has been an industry that not only has sort of very significantly shifted online, but it's an industry that's been confronted with incredible competition as the economy global economy has has sort of globalized and and very cheap fashioned sort of disposable passion has become accessible, you know, at very low cost. So, next succeeded against all of those headwinds and um I think it was it's it's an abject lesson in strategy, how to deploy a successful strategy, how to evolve in the in when confronted to with with with existential challenges, how to communicate with shareholders, how to how to how to create the right sort of environment for management and for staff. It it's just an exemplar really. So, what should you actually do with this information if you're trying to think about companies the way that Neil does? Well, three things. Back focus over sprawl. Look hard at what the management really cares about. And if you can't tell what a company does and where it's heading from the way that it talks about itself, treat that as a warning, not a detail. Britain still builds world-class companies. The problem was never building them, though.

[00:30:51]It's keeping them, focusing them, and giving them the room to grow up. Get that right. And in theory, there's no reason the next Micron couldn't be British. Neil, thank you as always for your time. If you got something from this, please do subscribe. It helps the channel more than you'd think. And send it to someone who'd find it interesting.

[00:31:07]Leave us a comment down below with the British company you reckon should have been a global giant but never made it.

[00:31:13]Neil and I'll be back with more next week. Until then, take care.