Sir Mike Rake: Our politicians don't have business experience

The MT Interview: the new CBI president may breed polo ponies, but he's a down-to-earth type who'd talk to anyone to boost British business.

by Chris Blackhurst
Last Updated: 13 Oct 2015

The new head of employers' organisation the Confederation of British Industry went to boarding school and is crazy about polo.

Sir Mike Rake, 65, president of the organisation that likes to think of itself as the 'Voice of British Business', is that person. He went to Wellington College, used to have his own polo team and played regularly at weekends. Now he just has a farm in Argentina that breeds ponies.

Through polo, Rake got to meet Prince Charles, who made him chairman of his Business in the Community charity. Rake plays tennis at the Harbour Club in London, whose gym Princess Diana used. For years, Rake was known as Britain's highest-paid accountant, on a salary of £3.6m a year (he received a knighthood for his services to the profession).

Put like that, Rake's presidency of the CBI is manna from heaven for those who maintain Britain's bosses are detached and elitist. He ticks all the boxes marked high rewards, clubability and patronage. If you were a TUC or Labour party propagandist you could have a lot of fun with the Mike Rake conference newsreel.

But while it would be right - there's no getting away from the facts - it would also be unfair. Rake is also the person who says: 'I hate golf, it's a capitalist activity.' Yes, I know that invites the question: What and polo isn't?

But that should provide some clue to Rake's character. The truth about him is that he is far more complex and down-to-earth, inclusive, egalitarian and better company than the bare bones of the CV suggest.

Likewise, what the brief narrative does not say is that he is deeply concerned about the condition of British commerce and enterprise; the contribution they make to the economy and society; and that his enthusiasms go far beyond some swanky offices in central London or a hospitality tent on the side of a polo field.

We're at the CBI headquarters inside Centrepoint, the tower block at the eastern end of Oxford Street. There's a CBI minder present - the impression I get is one of slight nervousness, these are early days and the CBI secretariat, a proper bunch, are not used to their new president and what he might say.

The room we're in is functional and I suspect little used - Rake's main office is at BT, where he is chairman (he's also deputy chairman of Barclays, director of McGraw-Hill Financial, the US financial information publisher, chairman of Majid Al Futtaim Holdings, the leading shopping mall developer across the Middle East and North Africa, and a member of the prime minister's business advisory group).

He's got a friendly, heavily lined face, befitting of someone who probably smiles a lot. He's certainly heavily built and will have to watch out for all those chicken suppers on the CBI regional circuit.

As a boy, Rake dreamt of being an RAF pilot like his father. 'My family were all doctors, except for my father, who joined the Air Force as a Spitfire pilot. He's remarkable, still alive, aged 93, still plays golf three times a week. He's a hero of mine.'

The family moved around to accommodate the father's promotions. They were in Hong Kong, Korea and France as Rake's father went from pilot to commander to working for Supreme Headquarters Allied Powers Europe.

The young Rake went to international schools where the family was stationed, then to prep school in Devon and on to Wellington College in Berkshire. He was there as an armed services boarder. He didn't regard it as super-smart or superior - he was there because his father was working abroad.

The young Rake was desperate to follow dad into the RAF. 'I did all the tests and passed, and then they discovered I had various allergies. In true RAF-fashion, they said you can join the RAF but you can't fly. As if that was OK. I could not see the point of that. I was left feeling depressed.'

It was not just rejection by the RAF that got him down. 'I was also depressed by the state of the British economy.' He's talking about 1966, when he was just 18 years old.

I don't know about you, but when I was 18, the state of the economy was not on my radar. It says something about the serious and calculating mind of Rake, not to mention his fierce ambition, that he was extremely worried. It turned him away from university - he had places to study medicine or zoology - and towards work, from not worrying about getting a degree but to getting on and starting earning.

'I decided to become a chartered accountant, which I thought was better than being a lawyer. You could travel and go anywhere in the world, and it was more flexible.'

He began as a trainee at the medium-sized firm of Turquands Barton Mayhew, carrying out audits for the likes of Bowater and Ladbroke. It was tough, working during the day and training for exams at night. First time round, he failed, but he passed them at the second attempt.

Sir Mike Rake: Aged 18, I was depressed by the state of the British economy. Photo: Julian Dodd


By the time he qualified in 1971, 'the economy was in even worse shape. It was the period of the Edward Heath government, so I went abroad, to Brussels.' He chortles: 'I stayed abroad until 1989.'

He moved around. First, he looked after Europe for Turquands and then he was poached by the bigger Peat Marwick Mitchell - now KPMG - to run its Belgian and Luxembourg auditing teams. He was also covering West Africa, travelling regularly to Burundi, Rwanda and Zaire, which he loved.

His wife and four young sons lived overseas with him. Then, in 1986, Rake remarried, to Caroline, acquired five stepchildren and headed to Dubai. 'Funnily enough, it's like where we are now. It was in the middle of a banking crisis. Some of the banks were in the Middle East and China, and they had problems, same as those caught up in the crisis today.'

From Dubai he took in the Gulf and east to Yemen and Pakistan, and west to Saudi Arabia. 'I did lots of travelling; it was a critical part of my life. I had a fascination with the Middle East, still do. I'm riveted by the life and the culture. I'm frustrated that so much of it is misunderstood. We don't understand; don't appreciate the tribal differences and their religion. We don't appreciate the differences between Sunni and Shia, for example.'

Rake headed KPMG's Middle East practice, and then became senior UK partner, then chairman of the entire international firm.

When he quit in 2007, aged 60, he moved seamlessly to chairing BT.

'I thought I wouldn't get it,' he says of the BT post. 'Much to my shock and horror they called and said: "We want you." They said they were announcing my chairmanship that day. I was in Hong Kong; I hadn't even announced I was leaving KPMG and hadn't decided whether to accept BT.'

He freely admits to knowing 'nothing about telecoms or about BT when I became chairman. But I did know about providing professional services.'

What he found was a company in poor shape. BT made two quarterly losses in 2008, had large debts and was eating into reserves. It was making acquisitions but they had not been integrated properly.

'You walk into a business and it hits you what you have to do. In BT's case, it was to move very quickly, and this was in the most competitive, most regulated market in the world.'

BT was a company, says Rake, that was seeing 97% of its business disappear, from fixed landlines to mobile. It was stuck with a massive infrastructure, all for fixed technology. 'It created a huge stress.'

Under CEO Ian Livingston, it was much improved. 'He did a fantastic job,' says Rake. 'He got on top of costs. He turned it around. Now we're doing well for our shareholders, doing better than our competitors.'

Troubles remain. BT is a company that's burdened by its legacy and up against fleeter footed, newer rivals. I ask him about the TV football deal. Isn't that a desperate, defensive move?

He purses his lips, and then shakes his head firmly. It's not a question he likes, but neither is it one he shirks from. 'No. What we did with the Olympics last year (BT was a sponsor) was part of an extremely well-thought-through strategy. Football was a follow-on to that. We took the view that Sky can use our infrastructure but it won't sell us content at wholesale prices. Therefore, we thought we had to do it ourselves and put our money where our mouth is.'

As well as winning the football rights, BT has had 'the fastest roll-out of fibre-optic cable anywhere in the world. We will have installed super-fast broadband across most of the UK by 2016,' says its chairman proudly. (The roll-out - a hugely expensive state-subsidised exercise - has not been fast enough for many, especially in rural areas.)

'Our team has done very well. We're managing it, we're creating competition. Sky has been a fantastically successful company, but we believe the playing field has not been level, and now we're going to level it.'

There's a grin on his face. He clearly loves the battle. Also, the concept of a level playing field for all is something he holds dear - it's a phrase he uses repeatedly in the context of the CBI and British business being competitive.

As well as chairing BT he had the same role at easyJet. It was a famously combative episode, for Rake and for Sir Stelios Haji-Ioannou, the budget airline's colourful founder and major shareholder.

Let's talk about Stelios, I say. 'Let's not,' says Rake. His eyes narrow. He thinks for a second or two. 'EasyJet had a fantastic management team that took the shares from £3 to £11. I'm extremely proud of my time at easyJet.'

If that sounds like a statement from a lawyer that's because it might as well be. Stelios was, and remains, a serious, disruptive handful. Rake knows that if he said anything near the truth of what it was like dealing with Stelios, writs would fly. For a period, easyJet was the most colourful, litigious show in town. To his credit, Rake somehow retained his focus on the business throughout it all.

Rake is no stranger to boardroom high drama. He joined the board of Barclays at the start of the 2008 crash, when Diamond Bob was at the helm. With the bank beset by scandal from all angles - Libor, PPI mis-selling and dubious Qatari fund-raising - it lost its chairman plus its CEO, and many expected Rake, the experienced pair of hands, to take over as chairman and steady the ship.

But shareholders were baying for an outsider to take the job and Rake would have had to relinquish his FTSE100 BT and easyJet positions to take on a task so momentous. He needed the Barclays chairmanship like a hole in the head and had almost certainly been tapped up for the CBI job by then, and thus ruled himself out of the running.

So to the CBI. He admits to a certain surprise at the role he's landed. 'I'm a fairly passive character with a belief in natural justice. That's been my guiding principle. I was not a CBI junkie. I'd always regarded the CBI with enormous respect; very talented people in Richard Lambert and (current director general) John Cridland ran it.'

So far what's impressed him the most? 'Everything. The way they help businesses big and small, how they engage on Europe. I find our views across the board are very similar.'

The EU - and our remaining a member of it - is something he feels strongly about. 'We must stay in the EU, but a reformed EU. Some 80% of all companies and 77% of all SMEs want to remain within the EU and reform it from within. My eyes are wide open. I'm neither a Eurosceptic nor a Europhile.'

His view on the disaster that has engulfed the eurozone is firm. 'They would not be in crisis if the Maastricht principles had been followed, which restricted the level of debt that countries could have. We would not be in this mess.'

It was the CBI's own survey that shows 80% of businesses want Britain to remain in the EU and push for change from within. 'It's very refreshing to see,' says its president.

As part of his new role he had to attend the organisation's regional chairmen's dinner.

'It was the first one I'd ever attended. The two biggest issues raised by them were lack of skills and the future security of our energy supply. On the EU, I was told beforehand that the regional chairmen were a very broad church on Europe but I found less of a broad church than I expected. I think what happens is that companies are reluctant to speak out on Europe because they get damaged by the press.'

What the CBI needs to do, says Rake, is to equip its members with the facts so they can better make the case for staying in Europe.

'The only things we want from Europe right now are growth and jobs. We understand the importance of youth unemployment as well as anyone. We need to follow the Lisbon (Treaty) agenda and achieve more EU reform.'

One recurring complaint of the CBI membership is red tape. Successive governments have failed to curb it, despite promising they would.

'It's not confined to Britain. All the mature democracies say they are opposed to regulation, yet they keep adding more and more. The same politicians who say we must get rid of it have people in their departments looking at how to apply tighter controls on people, different ways of taxing a lorry, new health and safety rules. We need a cultural change.'

He's taken over at a difficult juncture for the business community. Society has developed a definite anti-business streak, much of it fed by the fallout from the banking crisis. What's he going to do to combat this mood?

'We must be unemotional about explaining the facts. What matters above all is that we effect employment and growth. Some of the criticisms are fair, some are unfair.' He laughs. 'And politicians are remarkably adept at not blaming themselves.'

'Look,' he says, 'we've got a lot to do to put it right. Politicians are populist, I know that. Whichever party is in government, it gets close to big business. Then as we get nearer to the election they attack big business. At times, political leaders have to assert themselves and ask if what they are doing is right.' He shrugs. 'All we can do is give all the parties the facts that affect jobs, employment and growth. After that, it's up to them - but there does need to be balance.'

What riles him is when politicians say things that 'do short-term damage to the people they say they're trying to protect. Society needs business, big and small, and we must work together.'

It annoys him that vital parts of the nation's make-up - education and healthcare - are used 'as political footballs. Infrastructure is the same. We need more cross-party agreement on these subjects or else nothing gets done.'

On the third runway at Heathrow, the CBI head is clear: 'We should have done it, no question, even though it's not the long-term answer.'

On HS2, he's less certain. 'I don't know if it provides value for money. We could spend it on short-term capital projects or use it to further a long-term ambition. I don't know which is right. But it is the case that we already have two railways and two motorways to Birmingham, and we don't have enough cross-country railways or a motorway to the north-east, for example.'

He'd like to see more people from the top of business enter Whitehall. 'They should be encouraged to feed back their experience. Our politicians and civil servants are bright but they don't have business experience. I want to see more apolitical people moving across, who could work with politicians to understand the pressures they're under and avoid major mistakes being made.'

In the past, the CBI has been something of an aloof body, akin to a semi-detached, quango-like branch of the Civil Service. Its rival, the IoD, can seem more combative and streetwise. How many of the hip, sunrise businesses of Shoreditch, for example, feel the CBI is batting for them? This might change if Rake sticks to his word. 'We must engage with all parties, the trade unions and the third sector.'

He is, however, scornful of Labour's energy prices freeze, which came from a focus group. 'If we ran BT based on what focus groups say, we'd be out of business in six months. There's something called leadership. When Lady Thatcher died, all the fortunes of the political parties fell because she showed up their lack of leadership. She believed in what she did and she went ahead and did it - and, overall, we made progress. She was a leader. Churchill was the same.'

The Daily Mail is unlikely to approve of his line on immigration. 'We should not be blocking immigrants from eastern Europe. We need them to come here to work.' Neither does he want Scotland to become independent, strongly defending the union.

FOUR CHALLENGES FACING RAKE

  • Help win the argument over the EU so that the UK stays in and achieves reform from within
  • Work with the Government to alleviate the skills shortage and raise educational standards
  • Reduce anti-business sentiment across society
  • Raise membership from the current 250,000 and make the CBI truly inclusive so it isn't perceived as just a voice for big business

He's all for rebalancing the economy but not at the expense of banking. 'The attacks on the City should cease.' The banks, which are a cornerstone of our economy, he believes, have suffered enough and should be allowed to flourish.

Education is a prime concern. 'We need better teaching for all. Since the abolition of the grammar schools you either spend to live near a good school or you spend to send your child to public school. If you can't spend, tough. That cannot be right.' And is he confident about recovery? 'I do feel the bottom has been reached, there's more confidence around.'

He would like to see companies, not only consumers, spending again. At the moment, lots of businesses are sitting on their cash.

'They need more confidence in the economic policy and the future. We need that confidence to return.' He holds up his hands in frustration. 'Some political statements can derail that confidence. We need investment in energy infrastructure, but then Miliband says he will freeze energy prices.'

What about polo? It's a sport that he loves, simple as that. As for the farm in Argentina, it's 'not profit-making'. He pauses, his eyes twinkling. 'Argentina, now there's another country where energy prices were controlled. There was no inward investment, trade declined, the country could not compete ...'

He has made his point. Expect him to make more of them in the months and years ahead.

RAKE IN A MINUTE

1948: 17 January, born in Rugby, Warwickshire

1968: Eschewed university and joined an accountants, moving to Peat Marwick Mitchell (now KPMG). Became senior partner of the UK firm, then chairman of KPMG International

2004: Made chairman of Business in the Community by the Prince of Wales

2007: Became chairman of BT

2010: Appointed chairman of easyJet

2013: Made president of the CBI

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