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Big is beautiful

Ex-Tesco boss Sir Terry Leahy on the virtues of large companies, the death of the high street, and his desire to start a grammar school

21 July 2012

6:00 AM

21 July 2012

6:00 AM

Sir Terry Leahy might be the UK’s most successful businessman. He turned Tesco, love it or loathe it, from a second-tier supermarket worth £7 billion into the £37 billion behemoth of the sector. As an interviewee, however, he is not a natural performer. There is no Bransonian bonhomie about him. He is dressed in a non­descript dark suit, and, though he has no entourage, is accompanied by a publicist from his publisher; he starts to steal not-so-subtle glances at his watch almost as soon as we have started talking. But Leahy’s awkwardness shouldn’t obscure the truths he has to deliver. He has a bracing analysis of the situation that Britain is in.

‘The welfare system in the form that it’s become is unsustainable and this is even before you start to feel the effect of care for the elderly with dementia,’ he says. Across the continent, he warns, ‘Economies are not growing fast enough and haven’t been growing fast enough for a long period of time. The problem with Europe extends way beyond the euro crisis.’ His fundamental worry: there isn’t ‘a coherent model for growth for developed ageing economies’.

Unsurprisingly for a former boss of Tesco, Leahy has little time for sentimentality. He rails, with uncharacteristic passion, against the ‘casual default that small is good, big is bad’. People only say that, he argues, because ‘no one ever got criticised for saying small is good, local is good.’ To his mind, economies of scale are ‘the main reason man has progressed and the others haven’t. We’re the only ones who can trust and exchange.’

Warming to his theme, he continues: ‘Actually, big is good.’ Popular products like the iPad are the result of intense market competition in which ‘countless technology firms went to the wall’. ‘So we shouldn’t be rushing round saying Witney should have its own computer manufacturer. I think there is a bit of intellectual dishonesty going on there.’ Witney is, of course, the constituency of the Prime Minister, who has fretted about whether big supermarkets are driving smaller local shops out of business.


Leahy’s also scathing about the idea of trying to preserve traditional high street shops. Twenty years ago, he remembers, there was a big debate about whether to allow a Tesco superstore in Amersham: ‘Now when commuters get off the train they go on their computer and shop online from all over the world. Well, you’re not going to stop that, are you? You’re not going to legislate to say that the lawyer from Clifford Chance, when he goes home to Amersham, isn’t allowed to shop on Amazon because of the threat to the local bookstore. What’s the point? You really are into King Canute territory.’ To Leahy’s mind, high streets now have to become about things other than shopping.

Another unfashionable quality that Leahy wishes to defend, alongside being big, is accepting risk. ‘One of the other bits of intellectual dishonesty that’s crept in is the idea of a risk-free life. Attempts to pass laws and regulations and to make things risk-free usually end up — at massive expense — distorting how we use resources. It would be far better if we had a much healthier attitude towards risk.’

This negative attitude towards risk is why Leahy wouldn’t want to be a politician. ‘The standards of public accountability are unrealistically high. It almost works on the basis that as an appointed official responsible for my money, you must never make a mistake and if you ever make a mistake I will hold you to public account and humiliate you. What results? Everyone is terrified, no one takes a risk. As a result they waste far more money than they would have otherwise because they do the wrong things.’

Leahy thinks this is especially true of ‘junior ministers’, words he pronounces with contempt. His beef is that they are ‘desperate to find some subject which they can say is a disgrace and bring forward legislation to fix it without actually seeing whether there is an issue at all’. When I put it to him that the bankers have rather damaged the case for risk, he says wearily, ‘The banks are a problem in any argument.’ He’s scathing about what he calls the ‘casino banks’, their pay structures and the fact they got ‘the taxpayer’ to bail them out.

There’s a risk-averse decision among Leahy’s regrets from his time at Tesco — pulling genetically modified foods from the chain’s shelves. ‘The argument should be revisited because it will be increasingly difficult to increase food production without GM.’

Leahy retired from Tesco just over a year ago, having spent nearly all his working life there. One thing he might do next is set up a school. ‘If you look at these great schools,’ he says, ‘they were usually founded by somebody who had made a few bob a few hundred years ago.’ The public debate about education is becoming more honest, he says: it’s encouraging to see a recognition that standards haven’t been rising year after year. He feels, though, that the coalition has ‘got to open up to the debate about why grammar schools are good and why not have more grammar schools’. He maintains that for children who, like him, grew up in homes with no books, grammar schools were crucial.

But Leahy is adamant that he wouldn’t set up a school unless he thought government and society would welcome it. He wants any school he’s involved in to be a grammar: ‘I’d be saying choose ­Liverpool and see if a good selective school could make a real difference to actually how those kids from the very poorest backgrounds do.’ The message to the government is clear: if you want Britain’s most ­successful businessmen to consider a free school as their retirement project, let them select.

Management in 10 Words by Terry Leahy is published by Random House.


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