Iain McCombie, joint manager of the Baillie Gifford UK Growth Trust, discusses why adaptable UK companies in sectors that drive growth may still prosper over the long term, even as international trade restrictions increase.
As with all investments, your capital is at risk.
Recording a podcast about UK growth companies soon after President Trump's "Liberation Day" tariff announcement shows how quickly events can redirect the conversation. McCombie, Baillie Gifford's head of UK Equities, remains focused on the same task: finding businesses with the potential to grow over many years.
"What matters now is how management teams respond to uncertainty," says McCombie, who co-manages the Baillie Gifford UK Growth Trust with Milena Mileva.
"Strong leaders adjust when circumstances change. Much of our time goes into understanding companies - the way they think about the long term and how well they can adapt."
The latest *Short Briefings on Long Term Thinking* podcast examines what the UK government's growth plans could mean for McCombie's portfolio companies. Prime Minister Sir Keir Starmer has promised to "slash red tape," "kickstart growth," and encourage long-term investment. He also said the US tariffs "don't so much change as turbocharge" the initiative.
"One issue I keep hearing companies raise is the growing weight of bureaucracy," McCombie says. "Anything that cuts through that would be welcome. But it won't be easy."
The government's Invest 2035 strategy focuses on several "growth-driving sectors," many of which include companies backed by McCombie and his colleagues.
Renishaw is a major advanced manufacturer, producing probes, sensors, and related equipment for precise measurement and control. Its products support work as varied as semiconductor production, aeroplane engine-blade manufacturing, and the operation of robots and other automated systems.
"In engineering, putting roughly 5% of capital expenditure into research and development is considered a strong showing. This company spends nearly three times that share to stay at the leading edge," McCombie observes.
Baillie Gifford is the largest institutional investor in Games Workshop, the company behind Warhammer fantasy miniatures. Games Workshop sells them through more than 500 stores worldwide and through other retailers. Following lengthy negotiations, it recently granted Amazon the rights to adapt the Warhammer universe for films and a television series.
Games Workshop has spent more than 30 years building its intellectual property, and it guards that work closely, McCombie says. The company is thinking well beyond the short term; it wants production and storytelling to remain faithful to its exacting standards.
Digital technology is another growth area in which McCombie invests. One holding is Wayve, which develops software for driverless cars. Instead of relying on elaborate, hand-coded rules or costly collections of labelled data, Wayve trains general-purpose models on real-world driving footage and highly detailed simulations. The system learns to interpret its surroundings and plan what to do. Nissan plans to install Wayve's technology in its cars from 2027.
McCombie points to Auto Trader, one of his largest holdings, as a clear digital success. "It's 11 times bigger than the number two player and 14 times bigger than the number three: that's dominance," he says. The company is still expanding into adjacent services, including arranging car-purchase finance for shoppers and earning a commission on those deals.
The discussion also looks at investments in financial-services firms, including Experian, which specializes in consumer-debt data. McCombie considers how the government's housebuilding ambitions might help Volution Group, a maker of ventilation equipment.
He ends on a hopeful view of the period ahead. "History teaches you to be an optimist," he says. "Backing the human spirit, backing human ingenuity - that's what buying equities is all about. And in the long run, you're right to do that."
Listen to the podcast here.
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