Why L&G boss Nigel Wilson keeps Karl Marx on his bookshelf

The Legal & General CEO was recently voted Britain's most admired leader. His next big idea? Flat pack homes.

by Andrew Saunders
Last Updated: 18 Jan 2018
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Down to business

His heroes are those muscular figures of the post-war consensus, William Beveridge and Nye Bevin, and Karl Marx sits alongside business classics like Jim Collin’s Good to Great on the well-stocked bookshelves in his City office.

Legal & General chief exec Nigel Wilson is a man with a purpose, a capitalist who believes in the system, but also believes that it requires a serious overhaul to meet the needs of the many and not just the few. 

‘Capitalism works, what we are lacking is inclusive capitalism. We have had a complete breakdown in the dialogue between business, politics and regulation which has created a huge void and many, many market failures’ he says.

‘What we’ve seen over the past 30 years is the necessities – housing, health, education – all becoming more expensive. The money used to sit in banks and the government. Now it is the big institutions, pension funds and sovereign wealth funds, which have the money. We need to get back to the times when these people invested for the long term.

‘In 1948 we had Beveridge. Now we need Beveridge 2.0 to create fairness in society and make the necessities cheap again.’

Not the kind of talk we are used to hearing from our pensions big wigs, but it is just this kind of bold thinking which helped to get him voted Britain’s Most Admired Leader at MTs prestigious Britain’s Most Admired Companies Awards last December.

Furthermore, he reckons that L&G – best known as the general insurance business with the multi-coloured umbrella logo – is uniquely well placed to do something about that. Because as well as all those home, contents and car insurance policies, L&G is also a huge pension fund business, looking after £950m on behalf of the nation’s millions of private pension holders.

How is he going to do it? By using L&Gs firepower to invest directly in infrastructure and build assets for the long term, providing facilities that meet a general need and also provide it with stable income over many years to fund its pension obligations.

‘We look after almost £1tn of capital now. Money has never been so cheap, tech has never been so exciting and market failures have never been so big. What we have been doing for the past 10 years is to create constructive collaboration between the people who can put things right.’

Of course it’s also making a virtue out of necessity. Many of the old staples of pension fund investors simply don’t deliver adequate returns required any more, thanks at least in part to the distortions of quantitative easing on the financial markets.

Wilson and his fellow pension fund managers have got to find new ways of generating revenues that will last for decades, but the one does not preclude the other. ‘Our line is that by doing the right things for the right reasons, you can also be commercially successful. It allows us to operate as a very long term business.’

Take housing for example, surely one of the more egregious market failures in the UK in recent years. ‘We have a model where people say "The housing market has recovered, house prices have gone up 9%" But house prices going up endlessly is a bad thing. We have to reverse 30 years of getting things wrong.’

The problem he says, is simple and well known. We simply don’t build enough houses. But even though the government has got the message, with a target to build one million new homes by 2020, the industry is never going to make those numbers without wholescale modernisation of the way houses are built. ‘The answer is modular construction. You’d never dream of saying to a car maker, "Please bring all the bits round over the next six months or so, and then hire a bunch of people to put them all together on my drive."

‘We have to move on from bricks and mortar – the biggest housebuilder in Japan has built 2.3 million homes using modular construction and modern techniques.’

He has certainly put L&G’s money where his mouth is, with a huge 550,000 sq ft factory near Leeds ready to turn out modular flats and houses made from cross laminated timber. At full chat it could produce 3,500 of them a year, a one bed flat in a week, a two bedder in a fortnight.

The homes are shipped in units on the back of a lorry and bolted together on site with minimal finishing required. The first one-bed flats have been bought by housing association RHP and erected in the leafy south west London suburb of Richmond, a neighbourhood where the more traditionally-constructed Victorian houses sell for millions and rents start at around £,1000 a month.

Aimed squarely at the kind of essential workers who would normally be priced out of such an upmarket area, the flats are very small – only 280 sq ft – but modern, well designed and for rent at around £600-£700 a month. They may well be the affordable homes of the future.

Wilson is also a big believer in regional regeneration, and has invested hundreds of millions in regeneration schemes like Central Square in Cardiff, The Slate Yard in Salford and Thorpe Park in Leeds, as well as in the south east. The £240m redevelopment of Bracknell town centre which completed last year ‘Was the largest retail-led urban regeneration for 25 years. We had to be very bold to do it. When we put the lights on, 62,000 people came to see it. That’s a lot for a chilly evening in November.’

Of course there is a catch – the homes he will provide will all be for the PRS market – the Private Rented Sector. They will not be for sale. But for many, he says, home ownership has proved a financial struggle and new pay-as-you-go lifestyle make it less attractive to younger people anyway. ‘There’s such a demand for it. Jobs are more mobile, we’ve got to stop telling people they should own their own houses.’

The 61 year old Wilson himself is wiry, softly spoken and intense, very much a meritocrat. He grew up in a two bed council house in Newton Aycliffe, County Durham and studied economics at the University of Essex before taking a PhD at the prestigious Massachusetts Institute of Technology. He joined L&G as CFO in 2009 before becoming CEO in 2012. 

Father to five daughters whose pictures take pride of place above his desk, Wilson is a big champion of diversity and has pledged that 50% of L&Gs top execs will be female by 2020 – the 5050 by 2020 plan. ‘When I joined virtually all the senior managers were men. Now three of our MDs are women, and our biggest division is run by a woman [Cheryl Agius]. We’ve created a lot of role models so people can see then and think "If they can do it, so can I".’   

A successful amateur runner with a clutch of national titles to his name, he knows that it is important for everyone in the L&G to share his vision of inclusive capitalism. ‘It’s got to exist within the firm as well as outside it. We’ve moved from ambition with a small ‘a’ to Ambition with a large A.

 ‘People come in every day with fire in their bellies and they see stuff happening. It’s not just that we are doing well commercially, it’s that we are also doing really good things.’

No doubt Beveridge and Bevan would approve. 

Image credit: Julian Dodd

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