The world is in an economic "tsunami" with British business continuing to face its toughest trading conditions for a generation.
Allan Leighton, the former CEO of Asda and one of the UK's most respected business figures and management thinkers, said it was wrong to talk of being in the "aftermath" of the economic crisis. "We're still in it and it's going to be with us for another two or three years. Most people I talk to say it is the toughest they’ve ever known."
Leighton, who today chairs a number of UK retail and technology businesses, said it was not just the case of a few things going marginally wrong. "It is everything going wrong at the same time. We have a private equity bubble, housing bubble, country bubble, banking bubble, currency bubble, liquidity bubble. Even now we still have problems with banks. The issue with banks is as much what we the consumers think when we hear about banks in trouble, and what it then does for confidence. Likewise we have FTSE companies sitting on more cash than they ever before but not investing it. The problem is a confidence problem, not a liquidity problem."
He said the problem wasn't any better in private equity. "It's almost in reverse, yet has more cash than ever. What are they going to do with it? They raise funds with the idea of investing the money, are they going to give it back?"
In the UK Leighton called for a credible growth plan, joking that Britain was being "austeritised to death" and needed to think harder about what it could do on its own to grow, regardless of what was going on elsewhere in the world, especially in the eurozone.
"The austerity programme is ok but where is the growth plan? You do not stick to what you are doing if it is not working. Every day there is a new government initiative yet the difference in business is that at some stage you have to report on whether it works or not. In government you never hear what happens to any initiative. If I was in charge I would never allow another initiative, I would have clearly defined programmes instead. Ultimately business can do much more for the country's growth than politicians because they are long term, they employ the people. If businesses do the right thing then we would stand more of a chance. Business is here today and here tomorrow."
Leighton, who himself dismisses a political career, called for an immediate cut in VAT by 2.5%. "What we have lost in retail sales and profitability is more than we got from the tax hike. Most economic recoveries are consumer-led, not government-led." He also called for "real" apprenticeships and technical colleges, teaching people business skills again. "What else would I do? I'd get the 50 brightest minds in a room and wouldn't let them out again until we have at least one great idea about driving growth."
Leighton said leadership was not about being popular and that was where a lot of politicians went wrong. "It is about doing what you think is the right thing to do. Leadership is not a democracy, someone has to make a decision. Stuff goes wrong. The more you say I did not get it wrong the more you lose credibility. You have to admit your mistakes and not hide. It is tough but you learn more when you get it wrong. I can remember lots of things I have got wrong. Infact I am wrong about 30 per cent of the time, but that's a great strike rate."
He added that in the present climate you really get to find out just how good your people are. "I actually like trouble. It is very easy to run things when everything is going ok, but if you have a problem then you have to really think." So what should executives being doing when it’s tough? "There are some key things you can be doing. Never be complacent; accept mistakes will be made; never panic; surround yourself with the best people; do not get distracted by external noise; modify as you go; delegate decision making but not responsibility."
Leighton said distilling the welter of data that is thrown at you was also another key skill. "There is too much data out there. You have to boil it down to four or five things that you have to focus on, you cannot be distracted by another 25 things. The day-to-day has never been more important and you have to create the right environment. Momentum is very important in business, you make a decision, get it right, become confident and make more good decisions. To gain momentum you have to create the right environment. Two years ago Tesco was the best retailer in the world because it executed everything better than anyone else. Executing well became a habit, not an act. Execution at its best is when you do not even know you are doing it well."
Leighton added that being tough also called for being radical. "If you don’t change direction you are likely to end up where you are going. The government should put that on a T-shirt and do something about it. Learning how to change direction is important. What I learnt at Mars is that companies do not die, people kill them. All the economic tsunamis were burst by humans."
He added though that sometimes the radical thing to do was nothing. "When you need to make radical decisions you have to make sure you are making the right decisions. Sometimes you just have to stick to what you do. Sometimes the radical thing is not to change at all."
Meanwhile Leighton said one of the temptations in the present climate was to pick up struggling companies. "In this climate there are lots of businesses for sale and going bust. But don’t get out of one hole by digging another. It is very dangerous to take defensive opportunities in the current climate. 70 per cent of mergers do not work. Don’t bet the company, bets that are offensive are the ones that work."
However Leighton conceded that life at the top can be a lonely place though. "Being CEO is the best, toughest and loneliest job in the world. Being paranoid is a fundamental trait of being a CEO too. If you are not worried about everything you are not in the game."
Professor Michael Luger, Dean of MBS, said Leighton's observations were in line with the consensus among business leaders and many academics, namely that we are experiencing much more than a normal recession, and we are likely to have sideways growth for some time to come.
"Allan painted a grim picture of simultaneous bubbles bursting, creating a tsunami, as well as structural problems that will further constrain growth. Widening budget deficits around the world will also divert more and more of our tax revenues toward debt service, especially when this period of artificially low interest rates passes."
Luger said Leighton recognised the danger of these trends, namely the further erosion of public confidence in government and consumer and investor sentiment. "Companies are afraid to hire and invest and consumers are less willing and able to spend."
In terms of what to do to stimulate the economy, Luger added the importance of additional infrastructure spending to Leighton's list.
"While we need careful budget discipline, we cannot ignore the importance of demand-side stimulation," added Luger. "But tough calls have to be made by businessmen as well. That may mean delaying some expansion decisions to ensure sufficient cash is on hand, or cutting losses on outmoded parts of the business."
Luger said the topics Leighton covered were not particularly unique but added: "The story Leighton was able to weave was compelling for the way he told it, and for the broad and deep experience he was able to draw from and use as examples."
Watch Allan's interview >>