Commentary: Even Richard Branson isn't immune to this coronavirus collapse
Virgin's branded activities are almost all heavily exposed to the impact of COVID-19, says the Financial Times’ Jonathan Ford.
LONDON: Few entrepreneurs have grasped as clearly as Richard Branson the importance of public relations in business.
Over the past three decades, the tycoon has assembled an empire by trading access to the likeable image he and his Virgin brand project in return for hard assets and stakes in enterprises.
Behind the happy-go-lucky exterior is a carefully contrived pose.
It portrays Sir Richard – in fact a vastly rich, private jet-toting tax exile – as a mixture of hippy and buccaneer, a scrappy outsider taking on the complacent and anti-competitive giants of big business.
It is an image that has consistently infuriated sceptics. It’s also one that is now buckling fast.
Virgin’s lustre was fading long before the coronavirus outbreak. Sir Richard had surrendered or lost his various UK railway franchises. His airlines were struggling.
The challenger bank he had assembled by merging Virgin Money with CYBG (which owns the Clydesdale and Yorkshire brands) was wrestling with liabilities relating to past mis-selling of payment protection insurance policies. Since the deal in 2018, its share price had fallen by about two-thirds.
But the pandemic has done much more than just increase the pressure on his airlines, while also putting the tin lid on some of his other leisure ventures (such as the new Virgin Cruises).
That was perhaps predictable given the unfortunate spread of Virgin’s branded activities – almost all heavily exposed to the impact of the coronavirus.
AN UNAPPETISING REALITY
COVID-19 has ripped off the showman’s whiskers, revealing the less-than-appetising reality that lies beneath.
With his pitch for a taxpayer-funded bailout of Virgin Atlantic, Sir Richard has renounced what remained of his anti-establishment credentials. There’s no sign now of the apostle of competition, who demanded that weak airlines be allowed to fail as recently as 2009.
The “commercial loan” he seeks is needed because the airline – which has not made a profit since 2016 and had negative net worth on its latest balance sheet – could not qualify even for any of the government’s subsidised business assistance loans.
EasyJet, by contrast, got over the line because of its more conservative financials, not through selective state assistance as Sir Richard has implied.
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Then there is the PR own-goal of an extraordinary open letter he penned to fend off his critics.
First off, Sir Richard tackles the question of his tax residence, which is understandably sensitive when you’re pitching for taxpayers’ money at a time of massive public deficits.
There is no reason to doubt him when he says he chose to live on Necker Island because of its physical, rather than its fiscal, charms. But was it then really necessary to register his kingpin holding company in the disclosure-free tax haven that is the British Virgin Islands as well?
Next comes the statement on Virgin’s embarrassing lawsuit against Britain’s NHS, which is something that might come from Mr Barnacle of the Circumlocution Office in Dickens’ Little Dorrit.
The facts are, briefly, that there was a lawsuit and Virgin Care, an NHS contractor, extracted damages from the health service over a commercial contract it lost out on – although a casual reading might persuade you that the opposite was the case.
Virgin says that neither the group nor Sir Richard pocketed money from the settlement.
A BILLIONAIRE’S TRUST FUND
Now, none of these are exactly hanging offences. We know Virgin is quick to fight his corner when it comes to government contracts.
Remember how it appealed successfully against the UK Department for Transport’s decision when it lost the competition to run the West Coast main line?
But by seeking to cloak the facts in slippery PR syntax, Sir Richard does more than just encourage the suspicion that there can’t be smoke without fire in all this.
Much worse, he reminds us just how predictable and mainstream Virgin has become, aside, that is, from the strange boy-racer fantasy that is the Virgin Galactic space tourism outfit.
A bank, some fading airlines, and a gym chain far from the IT-enabled home exercise cutting edge typified by the likes of Peloton. This is less an exciting entrepreneurial group than a billionaire’s trust fund, wearily coughing up royalty payments for use of the brand back to the treasure island HQ.
It’s long been a source of mystery why the paying public keeps buying into Sir Richard’s increasingly vestigial buccaneering image, shelling out for memberships in his pricey and not very glamorous gyms or – even more puzzlingly – investing in ISAs with Virgin Money (a venture Sir Richard once promised with comic chutzpah would deliver his objective of a “fairer distribution of wealth”).
The daredevil stunts are long gone. Forget ballooning round the world or abseiling down buildings.
These days Sir Richard seems happier hobnobbing with global bigwigs at meetings of The Elders, the celebrity talking shop he set up to seek solutions to the world’s intractable problems.
There is a concept in television that describes the moment when a show that was once popular but has grown less so makes an attempt at publicity, which serves only to highlight its waning relevance.
With its ill-judged pitch for public assistance, it’s worth asking whether Virgin’s PR machine has finally jumped the shark.