Rishi Sunak has made a striking admission, conceding that business support schemes he designed as chancellor during the pandemic propped up companies that "would and should" have gone under.
The former prime minister argues that Britain must learn to embrace "creative destruction," a concept that has powered the US economy ahead of its rivals, even if that means watching more businesses fail.
Sunak wrote that intervening in businesses is "nearly always the wrong thing to do," and that the rush to assemble Covid support schemes left no time to distinguish between fundamentally weak firms and viable businesses knocked sideways by lockdowns.
As chancellor, Sunak worried about the impact of these interventions on the economy, fearing they had "upended the natural processes" of the economy.
The intervention will resonate uncomfortably with small business owners who credit furlough, bounce back loans, and business rates relief with their survival.
However, Sunak's diagnosis of the UK's underlying malaise is harder to dismiss, as he points to the claim that Britain's economy has lost its dynamism.
Nearly one in ten listed UK firms is now a "zombie company," generating just enough cash to service its debts and little else, a figure that has doubled since the financial crisis.
A fresh wave of zombie firms is already facing collapse as HMRC begins to call in pandemic-era tax arrears.
Sunak points to OECD research showing that firm entry and exit rates have fallen by around three percentage points across the developed world since 2000.
Before the financial crisis, the churn of firms entering and leaving the market added an estimated 0.7 per cent to UK productivity growth, but that contribution has since collapsed to just 0.1 per cent.
The contrast with the United States is stark, with the median age of America's 20 largest listed companies having fallen from 124 years in 2010 to 50 in 2025.
In the UK, the equivalent figure has risen from 94 to 121 over the same period.
The result, Sunak argues, is an economy in which neither labour nor capital flows to where it is most productive.
UK GDP per head now sits 42 per cent below America's, and output per hour worked has trailed the US, France, and Germany for four decades.
Sunak attributes American outperformance to four factors: cheap and abundant energy, faster technology adoption, the dollar's reserve currency status, and a culture that treats business failure as a normal part of entrepreneurship.
The former Conservative leader reserved particular criticism for the Employment Rights Act, which he described as "sclerosis-inducing" legislation that has undermined Britain's flexible labour market.
Sunak argues that any future government serious about growth would have to repeal this legislation, which has drawn repeated warnings from small firms over hiring costs and tribunal risk.
His conclusion is unlikely to win many votes, but it is refreshingly candid: "We can't, and shouldn't wish to, save every business. We must learn to love creative destruction or see our economic power destroyed."
This message cuts both ways for SME owners, who may see a more dynamic economy as a promise of cheaper capital, better staff, and bigger opportunities, but also a smaller safety net when the next crisis hits.
