UK: THE DAVIDSON INTERVIEW - HOWARD DAVIES. - Having boosted the CBI to a new position of influence Howard Davies is on the move again, adding another post - at the Bank of England - to his impressive cv. But, asks Andrew Davidson, will his wide range of

Last Updated: 31 Aug 2010

Having boosted the CBI to a new position of influence Howard Davies is on the move again, adding another post - at the Bank of England - to his impressive cv. But, asks Andrew Davidson, will his wide range of skills find full expression in the rarefied confines of Threadneedle Street?

Clever man, Howard Davies. After stints at the Foreign Office, the Treasury, McKinsey's, the Audit Commission and the Confederation of British Industry, this month he starts at the Bank of England as deputy governor at only 44. He is, you would imagine, a headhunters' dream: all sharp intellect, clubbable manner and itchy feet long used to treading the corridors of power. 'Send for Davies' went the cry when the last deputy governor, Rupert Pennant-Rae, was forced to resign after a prolonged indiscretion with a financial journalist. This time Eddie George, the Bank's governor and Davies's former boss from the Treasury, must be pretty intent on pegging his man down for good.

Too many moves? Davies, sitting casually on a sofa in his brown box of an office at the CBI's Centrepoint headquarters in London, shrugs. Earlier he had explained that he had no truck with the traditional British attitude that you choose your career at 22 and then stick to it. 'America', he points out, 'is full of people who re-invent themselves all the time.' If you keep moving, you keep fresh, the argument goes. And Davies could not resist the call from his old chief in his hour of need. Even so, it always surprises people that so able a manager, cutely dubbed 'boss of bosses' by Radio 4 recently, has never really had a proper job in business at all.

When we met he still had a couple of months to go at Centrepoint before the latest move. His is a familiar face from conferences and platforms around the country: the bald pate, the flash of grey hair above the ears, the stern features. In photos he often carries the look of a startled deer, all regal alertness and watchful eyes. In person, the impression is softer. He is warm and charming to interview, patient and astute in all the right places.

Only occasionally is there a hint of tetchiness if a question or subject irritates him, a trait which those who know him say he has to keep under control. No one doubts that being director general of the CBI is an arduous task, not least because it carries for the holder the considerable risk of 'repetitive dinner syndrome': in other words, continual travelling, speech-making, and listening to people who, occasionally, you might prefer to avoid. If, like Davies, you have a reputation for not suffering fools gladly, you swiftly have to learn not to show it.

Is he sad to be leaving? Not to be leaving Centrepoint, he says, which he doesn't like. His office is perched on the 10th floor of the famous tower block, high above Oxford Street and Charing Cross Road. He says it's certainly convenient for his west London home but as an office it's hopelessly designed for modern needs, with little space for wiring and with few places where you might bump into the rest of your staff. But he is sad to be leaving the CBI itself. He is only three years through a five-year term of office, and still in the middle of an overhaul of the internal management structure.

All who know him give him credit for boosting the CBI to a new position of influence, aided by his unique ability, as his predecessor, Sir John Banham, puts it, to 'get in the back door' of policy-making. That has been partly a matter of style, and partly experience, making Davies exactly the right man for the job over the past three years. The ability to influence policy-making in Whitehall and Brussels, he explains, has to be the key expertise of a CBI director general, hence why both he and his predecessor have come from the public sector. If businessmen and women knew how to do it themselves they wouldn't need a CBI anyway.

But Davies is more than just a lobbyist, of course; he is a sound front man who looks plausible on television with the right mix of brains and charm - but most of all brains. Talk to any of the captains of industry who have worked closely with him and the first thing they always remark upon, apart from his wide range of interests - Davies has views on everything from football and the arts to macro-economics - is just how clever he is. To others, of course, that can make him rather like one of those irritating boys at school who want to be top at everything and captain the cricket team.

Few would argue that he hands over the CBI in good shape. Started 30 years ago from an amalgamation of three interest groups - the Federation of British Industries, the National Association of British Management and the British Employers' Confederation - it has since grown in size and recently, subtly, in aims too.

In the old days, according to critics, it was something of a 'whinge-on-request' organisation. Now, with its unofficial mission statement 'to create a climate of opinion in which companies can operate efficiently and profitably for the benefit of all', it is far more proactive, producing initiatives on a range of issues, some of which (training for single parents, for instance) might seem closer to social affairs than industrial policy. But with around 250,000 companies as members (including most of the big ones - Tesco and GEC are notable exceptions), 300 full-time staff, a budget (funded mainly by subscription) of £17 million, and 13 offices around Britain, it does get listened to.

Davies acknowledges that this was not just his achievement. 'To some extent I was fortunate to come into the CBI at the same time that Michael Heseltine went into the DTI,' he says, 'as the whole idea of the Government's relationship with industry and competitiveness policy changed. The Government had got itself into a position where it was common parlance in the boardrooms and golf clubs of Britain that it didn't really care about industry and manufacturing and this was not a good thing. Heseltine was determined to change it and I was too, and it worked quite well.' When I ask him what he thinks were the main achievements of his short reign as director general he cites the improvement in quality of the organisation's economic work, and its presentation to government. Others say he is too modest: Sir Michael Angus, president of the CBI when Davies came in, points out that the organisation's relationship with politicians and Whitehall has been immeasurably strengthened - almost to the extent that other business organisations have been visibly irritated by it - and Sir Bryan Nicholson, the current president, cites the organisation's new willingness not to duck the issues.

The speedy setting-up of the Greenbury committee to investigate executive remuneration and the even-handed attempts to stay close to both Tory and Labour politicians are proof, they say, of Davies's intelligent leadership. If this sounds too much of a mutual admiration society, then it can be balanced a bit by pointing out that at least some of what Davies has achieved has been done by simply following through the policies instigated by his rather more combative predecessor.

But then Sir John Banham is a big Davies fan, too - he should be: he recruited him at McKinsey's, after which Davies followed him into both the Audit Commission and the CBI - and he is unstinting in his praise. 'Howard has been able to do things that I would never have been able to do, such as inveigle his way into the policy-making machine. He is much better at getting in the back door, whereas my instinct was always to batter down the front door.' The organisation's readiness to respond to the merest twitch of central government, as in the pay issue, shows how far it has moved on in Davies's time.

Davies believes that the CBI was initially discomforted by the rumpus over executive pay but the important thing, he says, is that, despite the subsequent furore, it was seen to act through the formation of the Greenbury Committee and its report. 'Yes, I think we were discomforted to some degree but that discomfiture did not sit and fester. One of the reasons why we asked Rick Greenbury to look into it was because we recognised there was very real public concern about senior pay, but it had been overstated and misplaced and if you looked at international comparisons it was very difficult to argue that British managers were overpaid. But equally, it is difficult to defend the remuneration practices of major British corporations en bloc because the more you looked into it, the more you could see there was great unevenness.' Likewise, with his invitations to Labour leaders to speak at CBI conferences, which he says always cause more of a stir in the press than they ever do among CBI members. 'On the whole business people are realists, they are not hung up about that kind of thing. When I invited John Smith to our conference in 1993, it was the first time a Labour leader had been invited to address the CBI, everyone sucked in their teeth and said, "What do you think about this?" But he came and made rather a good speech, and it went down quite well, and in 1994 the only comment I had was, "Why isn't Tony Blair at the conference this year?" And I said, "Well, I don't think you should invite them every year." And they said, "Why not?".'

Most business people, he continues, can read the opinion polls as well as anybody. They know there is a good chance of a change of government at the next election. 'The main question I get asked is: "Do we know these Labour people well enough?" not "Are you spending too much time hobnobbing with these wicked communists?".

'And the fact is if you are working in Europe in an extensive way then you have to deal with governments of the left and right, and commissioners from different parties, therefore you cannot live in a little world where things are black and white, where one lot are totally in and one lot totally out.' People have tried for years to fathom Davies's own politics. He spent part of the '80s seconded as an adviser to Nigel (now Lord) Lawson - 'extraordinary brain' he says of the former Chancellor of the Exchequer - yet he has also been labelled as a one-time Labour Party supporter. Enlightened self-interest? Probably. Like many in the public sector, Davies has learned to cover his tracks and work with whoever is in power. He is not unduly close to his roots. You would have to work pretty hard on meeting him, for instance, to guess that he spent his formative years in Manchester.

He was born and brought up there, the only child of two only children, with both sets of grandparents within walking distance of home, a set-up that ensured the young Davies had plenty of attention. 'My mother would deny I was spoilt,' he says with a grin, 'but I think I may have been - by my grandparents.' His father was an estate manager for Threlfalls pubs, before they were snapped up by Whitbread. Like many only children, Davies grew up fast, skipping the normal teenage phases of indolence and rebellion. He excelled academically at Manchester Grammar, where he launched the school newspaper, The Mancunian (now known as The New Mancunian), and won a history scholarship to Oxford.

After Oxford he tinkered with the idea of becoming a journalist but opted instead for the Foreign Office, where he was posted to the British Embassy in Paris. It is fair to say, from his own accounts, that he and the world of diplomacy were not mutually suited, not least because he was clearly ambitious for more than the normal civil-service career path.

'I felt under-educated in comparison with all the clever Frogs I met in Paris who had been to the Ecole Nationale D'Administration, the French business schools or whatever; they all knew about economics and management. I had just got an arts degree from Oxford, and an ability to speak French, and that was deemed sufficient by the Foreign Office for the next 38 years. I had a sort of inferiority complex about it.' He told the Foreign Office that he wanted to leave and was persuaded to try the Treasury. Again, he told his new bosses he wanted to go to business school. They said fine, so long as he worked a bit first, and then committed himself to coming back, rather than flouncing off to the private sector. He agreed, and eventually went to Stanford in America, an experience which he said changed his life. Why? 'Because it gave me a qualification which was quite useful in the private sector, and I went off to McKinsey. If I hadn't been to Stanford they wouldn't even have answered my letter.' More fool the Treasury, then, for sending him? No, he says, he had agreed before going to Stanford that he would see out another two years at the Treasury after he returned, and he did. It was just that the civil-service culture was not for him. 'I like to decide what I want to do and go and get it,' he says. 'The whole civil-service culture was that you made a decision after university and then people just posted you. You were a pawn, well, you might become a bishop or a king or a queen, but you were always getting moved by someone else. I just realised at Stanford that I didn't like it.' And you could hardly accuse Davies of avoiding the public sector. From McKinsey, where he worked with Archie Norman, it was on to the Audit Commission, the CBI and now the Bank of England, a move which surprised some as the position of deputy governor has in the past been seen as a rather mundane role, ordering the new carpet and that sort of thing. As many have already speculated, it is likely that Davies got the brief slightly rewritten before accepting.

He won't admit that, but underlines the fact that the deputy does now have more than just an administrative role. For instance, it is the deputy who, before the regular meetings between the governor and the Chancellor of the Exchequer, chairs the 'pre-meeting' which looks at all the data and presents a report as to what is going on. He says he approves of the current system, whereby minutes of the 'Ken and Eddie show' are published a month later, if only because it means everyone now has a good idea of the issues at stake.

'My own view is, if you look at the standard of press commentary, the quality of debate has improved. I find as I go around the industrial community that the awareness of factors that people take into account and the questions they are trying to answer is higher than it used to be, certainly higher than three years ago.' It is also fairly likely that the public will see more of Davies than they did of his predecessor at the bank. His familiarity with the media - his wife, Prue Keely, works in television news and his best friend since Oxford days, Peter Stothard, is editor of The Times - will no doubt make him a useful spokesman for the governor as the bank grows into its increasingly independent role.

What intrigues Davies's friends is: where does he go from there? Would he stay and become governor? Does he have other ambitions? Politics, perhaps? He has always said 'no' to that last one, and those who have worked with him say it is probably one role he wouldnot be suited to. For his flaw, if he has one, is that his own ability can make him intolerant of others' slowness. 'Frankly, Howard would like to run the country,' says one senior businessman, 'and he would probably make a better job of it than most.' But he would never be able to understand what are basically emotional issues. For Davies's expertise is in understanding the machine, not the voters who prop it in place. As another remarks, he is a fine manager and eloquent leader but not really a 'people person'.

For instance, he cannot understand the sympathy given to houseowners caught in the 'negative equity' trap, perhaps unsurprisingly given his role as adviser to Lawson when many of the crucial economic decisions surrounding the '80s house-buying boom were taken. When I mention to him a recent BBC Panorama documentary on the subject, transmitted shortly before we met, he positively fizzes. 'The programme was a total and utter disgrace in my view because it began and ended with the premise that it was all the Government's fault. These were contracts freely entered into by willing buyers and willing sellers in the open marketplace, grown-up people who could decide whether they wanted to buy a house or didn't want to buy a house. The programme implied that it was all done at the Government's insistence.' But wasn't the Government guilty of stoking the market? No, he says, the boom and bust in the house market was nothing to do with fiddling with the tax relief, it was to do with economic cycles. 'The programme betrayed a tendency that too many programmes adopt - which is, if things go wrong you blame the Government. Sometimes it rains and blows too hard and cycles form and things change. You can't abolish the economic cycle. At the top of a cycle people buy things and inevitably they become worth less.

'Now, it would be nice if government could abolish the economic cycle, and probably the Government's macro-economic policies in the late-'80s did exaggerate the cycle, it went up too high and down too low as a result, but that is different from saying the Government incited people to borrow more than they could afford. If people did that, they were betting on one outcome of inflation, that it would keep rising, and they bet wrong. The market is full of that - full of people who make the right decisions and people who make the wrong decisions.' Even so, it takes a hard heart not to acknowledge that many people feel emotionally that the Government must carry some blame. As one of his former CBI colleagues points out: 'Intellectuals like Howard do find it hard to understand the opaqueness of the man in the street.' None of which will be a disadvantage in the rarefied confines of Threadneedle Street. The only doubt is whether the wide range of Davies's undoubted skills will find full expression at the bank. He likes to remind journalists that the last time he worked under George his motto was 'Eddie George is always right. I must work harder' - an erudite twist on the maxim of Boxer the blind-loyal carthorse in George Orwell's Animal Farm, and a good jibe at the Treasury's management style. It does make you wonder if he will find the equally stuffy Bank of England any more congenial.

Biographical notes


Born 12 February, Cheshire

Educated Manchester Grammar and Merton College, Oxford


Foreign Office




Harkness Scholarship to Stanford Business School


McKinsey & Co


Special adviser to Chancellor of the Exchequer, Nigel Lawson


Controller of the Audit Commission

1992 Director general of the CBI

1995 Deputy governor of the Bank of England

What people say

'Howard is extremely clever and articulate and quick, and a very astute judge of the zephyrs in the political wind. The only weakness he has, if he has one at all, is the corollary of those strengths: namely that he is even less good than I am at suffering fools gladly.'

Former Director General of the CBI, Sir John Banham.

'Yes, I'm very disappointed he is going. He always said that if it had been a private-sector approach he would have turned it down, but the special circumstances of the deputy governor resigning at the bank made it a unique situation.'

President of the CBI, Sir Bryan Nicholson

'He had enormous flair, an acute mind and complete detachment from received ideas without being in any way iconoclastic or quirky. I had always assumed that clever young people were likely to be rebellious, but he wasn't at all.'

Former British Ambassador to France and Davies's first boss, Sir Nicholas Henderson, 1992

'The Audit Commission was where Howard discovered he was a good manager. I don't think he had known that before.'

An ex-colleague at the Audit Commission, 1992.

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