Jim Ratcliffe, founder and chairman, INEOS HARDtalk

Welcome to HARDtalk. I'm Stephen Sackur. What will the British

economy look like post-Brexit? It is a matter gasworks as the terms have

not been worked out, but already there are calls from post-Brexit

revival of it and's industrial base. One of the most powerful voices

belongs to my guests today, Jim Ratcliffe, the billionaire founder

and boss of INEOS, one of the top ten petrochemical companies in the

world, and a passionate advocate of shale gas as a game changing

catalyst of economic growth. Fracking may suit his business, but

would it really help Brexit Britain prosper?

Jim Ratcliffe, welcome to HARDtalk. Thank you. You built INEOS. It

really is your company. But in many ways it feels and looks like a bit

of a throwback to a sort of 20th-century corporate entity. Would

you agree? I don't really know what you mean by 20th century. It has

been a lot of hard work. I'm sure it has. First of all, you have built it

on petrochemicals. It is a carbon -based company. Yes. That is sort of

20th rather than 21st-century, isn't it? Well, there is a lot of talk

about the carbon economy and so on, but at the end of the day, chemicals

are used in just about everything that we use. So... And as far as you

are concerned, that will be the case forever? Well, it is difficult to

imagine things being made without chemicals, whether it is textiles or

iPhones or drugs or cosmetics, they all require chemicals. It is a

fundamental building blocks products that we use. All consumables. The

other thing that you have done is build your company buyer, innocence,

adopting a pretty ruthless, some might have used the word asset

stripping in a different era, but you have taken companies that were

not doing well, parts of bigger conglomerates, some of the biggest

chemical companies in the world, you have persuaded to sell them off to

you, you have cut costs, made them much more efficient, and you have

turned yourself into a business that has taken overly ducklings and

turned them into something else. There is truth in parts of what you

say. What we have essentially done years, we have bought unfashionable

chemical companies, companies which have a degree of cyclicality about

them, which public companies do not like, they like things to be more

predictable. We have taken this unfashionable businesses and have

tried to run them better. Asset stripping I do not think is

relevant, because we have not stripped or sold off the assets. We

do not sell things. We have focused on investing in, expanding them,

trying to run them better, trying to run in with cost effectiveness so

that they are competitive, and grow them. Most of the businesses in

INEOS of grown substantially over the years. What we try to do is

double the profitability of a business in five years. Which is

pretty astounding. And it has paid off. I mean, you have got operations

all over the world. The annual turnover of the whole group... It

depends on the oil price, but about $40 billion or $50 billion. Pretty

astounding. Why are you now so preoccupied with shale gas and with

fracking? Particularly in the UK. Preoccupied is a strong word. It is

one of the legs of INEOS. You need to step Kbit into our American

operations, which have benefited enormously from shale gas. -- step

back a bit. Chemicals is one of the biggest businesses in the world.

Chemicals derived from either oil or gas. That is the building block for

all chemicals. And of course when shale gas came along in America it

reduced the cost of raw materials to chemicals enormously, and we have

benefited from that in the United States. We have been on the

receiving end of the benefits of shale gas. But we do have this

recognition that in the UK, the UK has sat on a lot of hydrocarbons.

There is lots of coal, oil, gas. There is clearly lots of shale

kicking around in the UK. We have assets in the UK which would benefit

from shale. You have said that if we do not issue shale, it is difficult

to see how the UK can remain competitive. That is a pretty big

claim. You are sort of linking future growth prospects of the UK

economy... In manufacturing. Well, you're implication as well is that

there needs to be a rebalancing of the British economy towards its

industrial and manufacturing base and away from financial services and

some of the things that held sway in the late 20th century. Manufacturing

is important in the UK. It is important to the north of England,

and it gives diversity to the economy. Otherwise you just end up

with a services economy. Manufacturing, Fran number of

reasons, has collapsed over the last 20 years in the UK. -- Faure number.

Coming back to fracking, if you are saying that we cannot massively

expand the Manufacturing base without embracing many -- without

embracing fracking, that puts a big load on a policy which the

government is half-heartedly Philipp but which the public in the UK

clearly doesn't want. -- half-heartedly pressuring. What I

have said is that if you look at the evidence in the US, the evidence in

the US is that shale has been very successful. On the back of shale,

which has reduced the cost of gas by 75% in the US, so that they are now

very competitive on energy costs, it has encouraged huge amounts of

investment in downstream industries. $140 billion of investment alone in

chemicals. It is not just shale alone in the US that has promoted

investment and jobs. It is what it has done to the energy equation,

which is then promoted jobs downstream. Right... So that is what

I am saying. No, and I understand the message were picking up from the

US. But one obvious point is that the context of the US and the U.K.'s

very different. The US is a vast land, three and a half thousand

miles wide, where many of the states where the gas locked up in the rock

are not very well populated, and where the industrialised fracking

operations can continue without disturbing major population centres.

If you go to the US and you look at where the fracking is, I do not

think it is that much different from the UK. Really? Yeah. Dulles

airport, next to schools, you would be surprised where they are

fracking. They have got a very comfortable with it because they

have now been doing it for ten years. We have drilled one well in

the UK. They have drilled 1 million wells. The evidence is that it has

in very successful and it has not been the environmental safety

catastrophe that people are concerned about in the UK. I

understand the concerns. But the evidence in the US... Well, the

evidence in the US is ambiguous, I think, to say the least. I was

looking at a very recent report, put together my Madeline Finkel at PSE

Health Energy in New York. They say that the available science raises

substantial questions about the potential for harm to health, and

people living near drilling sites are presenting with symptoms,

including skin rashes, nausea, abdominal painful stop that could go

on. There is many more. They say that this needs further

investigation. No, I think the evidence in the United States is

that it has been embraced, predominantly by the local

populations, because it has brought investment and jobs. It has reduced

the cost of energy, and therefore it has brought further jobs, because it

has encouraged other industries to come in. The environmental and

health problems have not been there. Occasionally you get issues, but in

every industry you will get incidents. It is like a puncture in

the car. You need to change tyres regular. Chemicals is no different

in that regard. But in the United States it has predominantly been

embraced. Well, it is interesting. Obviously you have a stake in the

industry, because as you say, you have to rely on it and you want to

see it more in the UK. There are some people inside the industry, I

don't know if you know him, but Mark Boling, the executive VP of

south-western energy, which is involved in fracking, as a bit of a

mea culpa is says, we need to figure out how to do better on what impact,

surface supply, water in pact, drilling locations. We didn't come

out and say that there were risks and obstacles, and we should have

done. So he is saying that we haven't done a good enough job. I

think what he is saying is that it has been a learning process, which

is what happens in every industry that is new. Shale is a new

industry. It is ten years old, but if I look at the United States from

a chemicals point of view, it is the most highly regulated place that we

manufacturing. -- Manufacturer in. Because we are dealing with

flammable, explosive, toxic chemicals all the time. It is

highly, highly regulated. America is number one in the world in terms of

its regular Asian policies. I do not see that it is any different in

respect to shale. They would not allow shale if it was not say. But

it is not perfect, humans are not infallible and systems are not

infallible connoisseur from time to time you'll have issues like you do

in the chemicals industry. You would know as well as I do that many

people who live close to the fracking sites have been given

money, in the United States, but they have also been signed to --

asked to sign "Gagging clauses", which means that whatever health

problems they might experience, they have made a pledge to keep it

confidential. That worries a lot of people. Well, I wouldn't agree with

that. I don't think that is inappropriate behaviour, to be

honest. I am not aware of it, but if that is going on, it obviously not

appropriate. On the flip side of this coin, if there are 50 shales in

America, roughly, and one of them is underneath Pittsburgh in

Pennsylvania, that is less than ten years old, and today it is producing

double the amount of gas that the UK consumers. In a very, very short

period of time. If you look at the UK, the UK is running out of gas.

Gas is our primary energy source. Where do we go when the Northsea

runs out? Well, there is a lot of gas in the world. The world gas

price has come down, and not least you have exploited what is happening

in the US by shipping gas. But where does the gas go? My point is, does

the UK really need, on a densely populated, small Island, where there

are concerns amongst the public, whatever you say about the safety

record, does the UK need to exploit the gas locked in its rock when

there is plenty of gas from the US, Norway and many other places, which

can be bought on the open market? Well, there isn't that much gas. It

is difficult to ship because you need to liquefied and get down two

-160 degrees. It is a major investment. You are doing it. I am

less than 1% of UK gas. It is not gas consumes for heating at home, it

is gas bar a chemical plant. It is on a ghastly different scale. At the

moment the gas options in the UK are either Russian gas, or LNG in big

ships. But that is lots of the chips, and there is no competitive

advantage to shipping gas in big ships. It is quite extensive. If you

look at the UK today for energy, it is totally dependent on gas, which

predominately comes today from the Northsea, but is very much in

decline, or from nuclear, and we have an ageing fleet of nuclear

power stations which are all destined for closure. A final

thought on fracking, then. I think INEOS Group have declared an aim to

become Britain's largest buyer in shale gas production. Obviously from

a slow start, it is I do not think you are drilling any at the moment,

and those sites in the north of England which other companies have

begun to explore, there have in huge delays, planning applications have

been through the courts, et cetera. The British public would like to

know from you today. Do you still believe that the potential you see

in the UK for, you know, very serious industrialised shale gas

production, is going to be fulfilled? That promise will be

fulfilled? I can't promise that because we need to find, the process

we are going through at the moment, the next stage of development, is to

find out what is down there. We don't know yet. We have some

preliminary data that was done looking for: in the UK, and oil in

certain parts. What we need to do is do some seismic, which is, like,

x-ray ultrasound works, non-invasive work. Then we need to drill some

exploratory wells and take some samples. And that process will take

us through to the end of 2017. Let's talk now about your view of how the

UK can grow, and certainly can rebalance towards a great role for

manufacturing and traditional industrial activity. INEOS does

provide thousands of jobs, not least in Scotland right now. You are a

private company. Your turnover is many tens of billions of pounds

every year, but you are still a private company. Why are you a

private company? Because it means you are much less transparent,

arguably much less accountable, then if you are publicly listed.

Well I think you have to look at the flipside. Why would I do not want to

be a private company? Why would I wish to be a public company? Because

to be a public company I would be so have to sell equity and I have no

interest in selling equity. You would very much like to keep control

your own hands. Well, some companies are private, in terms of financing

we use the public debt markets rather than the public equity

markets and there are lots large private companies in the world. Jon

Lewis is one. Indeed there are. I just wonder whether you feel the

debate that the Prime Minister has prompted, in a sense, about

corporate governance, about inequality between the pay of the

very top business leaders including people such as yourself and the

average pay of shop or workers, and her desire to see the gap between

the two close somewhat. Do you think that is relevant to you? Or do you

think I run my own company my own way, I am complete the private and

that has got nothing to do with me? Well, no, I would say in our

business people are extremely... You know, you want skilled workers in a

chemical business because it requires certain levels of skill to

operate chemical plants, as I'm sure you can imagine. So, you know, what

is important to us is to attract good quality people. In doing so, we

pay market rate for... For the people to do those jobs well. In a

way it is not just about paying market rates. It is about thinking

about the whole sort of piece of your company, and the messages you

want to send about equality and the way the workforce is

compartmentalised or not. I mean, for example, here is a fascinating

stat. 20 years ago the average CEO made 40 times as much as the average

worker in his or her company. Now the ratio between the two is 180. Do

you happen to know what is in your company? No idea. I mean, what was

your take-home package last year? Absolutely no idea. I don't know.

You are the boss, you probably do no but you probably don't want to tell

me. No, I don't think I do know, actually. But I am in equities I am

a shareholder as well as an employee. You have to be careful you

don't mix those two different things. Well, I take that point, but

nonetheless, you don't even need to tell me anyway, because you are a

completely private company and you are the boss and you can do at you

like. That is the point I am getting out. Do you see... Also, you know, I

started life in a council house in Manchester. I have worked quite hard

to get where I am today and I don't feel particularly hirsute about the

fact that I have been quite successful. I have paid my taxes,

INEOS pays its taxes and I have worked pretty hard for those 50

years to get here. And I don't see a problem with that. It is quite...

That opportunity is open to everyone on the planet. You look at...

America embraces that concept much more warmly than we tend to do in

the UK. We get a bit green eyed about someone who has been

successful in the UK. Well, in America they laud people a little

bit more who have started at the bottom. And INEOS, anyone who

started at the bottom with INEOS, they have the same opportunity to

get to the top is anyone else. This is interesting, because you are one

of Britain's most successful businessmen, and indeed one of

Britain's richest businessman and Theresa May are sending out this

message, they want to reassess and rethink the way corporate Britain

works and they are, without necessarily using the specific

phrase but they are revising this idea about the unacceptable face of

capitalism. Do you think there may be barking up the wrong tree? I

think they need to be a little bit careful that because maybe there has

been one or two pieces of misbehaviour that they don't tar

everybody with the same brush. Because, you know, it... There are,

there always are in life, there is the odd bad Apple. You don't have

too assume that everywhere. And INEOS, I think we run a very

respectable problem, and rerun it ethically. I don't need lots and

lots of regulation and rules to run it. And as long as you are private

you can absolutely do it the way you want. Let's talk about Brexit. It's

fair to say you are one of the most successful business leaders to be

behind Brexit, support Brexit. Many other business leaders in the sort

of boardrooms, the corporate sector, seem convinced it is going to be

very bad for Britain. Why are you out of step with them all why are

they out of step with you? Well, I think... I was always, I wasn't a

strong Brexiteer, but equally I wasn't remain, either. How did you

vote? I voted to leave. I was clear on that, but not... I wasn't, I

didn't get too excited about it. What I was always of the view that I

thought that the Common Market was a good thing. You know, open trade

across all borders and no barriers, taxes and tariffs, that sort of

thing. But the United States of Europe was not a concept I was ever

comfortable with. I have been looking at some of the things you

said, because the press was very interested in what you said through

the campaign, and you seem to be saying that Norway would be a good

model let you like the look of, that is, being outside the EU and its

rules and regulations, but being in the European Economic Area. And you

said that, you know, and always seems to me to have access to EU

markets without the expensive EU bureaucracy. I know they pay some

taxes. Norway has to abide by the rules and it has to pay into the EU,

Frank Lee, almost as much per capita as the UK. The point I was making

was slightly different. We have two identical gas crackers in Scotland

and Norway. So one is in, one is out, and in terms of their ability

to sell into the market, there is absolutely no sense in mainland

Europe that we would rather buy from Grangemouth in Scotland than Norway,

because Grangemouth is in and Scotland is out. They are just

interested in a decent price, decent service. I guess the point, Mr

Ratcliffe, is that there is no possibility that Britain can have a

Norway style arrangement, that is full access to the European single

market, as Norway has, without accepting all of the quote unquote

four killers of the European Union's rules, one of which is the free

movement of people -- pillars. Norway accepts that. Our politicians

in the current government say they will not accept that, so it is not

going to be on the table. Does that make you second-guess your decision

to support Brexit? No, I think Brexit was the best answer for the

UK and we will find the right solution at the end of the day as

long as we negotiate sensibly. It wasn't just about markets, it was

also about sovereignty, and of course, that people are very

uncomfortable with the loss of sovereignty. The idea of a Common

Market was about a Common Market, not about loss of sovereignty to a

group of people who are unidentifiable to the British

people, and I didn't like the idea... You know, I think the UK

should make its own decisions about how it runs its economy and its

country, and what have you, but the idea of having a Common Market,

whether local market is open to everybody, is... Understood, but I

am just interested, because you have a voice of influence, you are a

significant business leader and right now the debate is hard Brexit,

soft Brexit, what should Theresa May and her government actually look for

in the detailed negotiation? In a sense, can Britain afford a hard

Brexit which gives us no preferential access to the single

market and the customs union, and what is your view on that? Well,

I... You know, at the end of the day it will be negotiation. It will be a

whole of negotiation, negotiations, but primarily it is going to be a

negotiation and it is not as if the UK doesn't have any cards. Because

the UK is the fifth-largest economy in the world, and you know, the

Germans are not going to to stop selling Mercedes and BMW is to the

UK market. So the UK market is extremely important to the

Europeans. But the German car manufacturers are not the ones

making the decisions, are the politicians in Brussels and Paris,

but they are investing and saying that you cannot afford to let

Britain leave the European Union without paying a heavy price,

because otherwise others may follow in the entire project will fall. At

the end of the day the politicians are influenced by the people who

vote in the business community, and the business community will make

their voice vote, in my view. INEOS has grown over the years by

acquiring things are negotiating, and one of the lessons, I suppose,

that we have learnt is that when you go into negotiation, then, you know,

the opposition is going to be in their penalty box, and we are going

to be in our penalty box. And we are going to have a bit of a scrap, and

that might last a little while, and we are probably going to finish up

somewhere in the centre circle, having eaten each other up awhile.

What we don't want to do, as the Brits, is start in the centre circle

with the Europeans in the penalty box, because then you will finish up

in their half. So they're just needs to be a sensible, pragmatic

negotiation. We are not going to win everything, but we should win the

important point is, because we have some very good cards, in my view.

And we need to retain our sense of humour. It was at the end of the

day, you know, the Brits are reasonably well liked in Europe, in

my view, because generally they are decent people, got a sense of

humour, they are pretty straightforward and honest. In the

Europeans recognise that, Europeans do like the Brits and they do want

Britain to be part of their community in the sense of trading,

in my view, because they like treading with the UK. So we need to

retain a sense of humour and at 3am in the morning when all the

decisions are made, we need to have a bit of background. Don't wilt at

3am in the morning. And the uncertainty that there is right now

is not affecting your investment decisions? Note. No, not at all.

Well, Jim Ratcliffe, we will end with that simple answer. Thank you

for being on HARDtalk.