Lack of plan leaves UK in doldrums, bosses warn
Boss of leading business group criticises No 10 for changes in policy amid increased costs and taxes
THE Government’s lack of a credible growth strategy has left Britain’s economy in the “doldrums” as businesses face a “wall of increased costs and taxes”, the director general of the British Chambers of Commerce (BCC) has warned.
Shevaun Haviland, who heads up the 80,000-member business body which represents almost 6m staff, condemned what she called “a clear lack of Government strategy to raise productivity and lift the entire UK economy out of the doldrums”.
Writing in The Daily Telegraph, Ms Haviland, a former No10 official, said that the “constant shifting of the sand beneath the feet of businesses as they head into a recession has been a recipe for disaster,” criticising the repeated changes in policy from Downing Street over the past two years.
Ms Haviland also delivered a damning verdict on Chancellor Jeremy Hunt’s speech last Friday in which he set out the Government’s plans for getting the economy moving again.
“Any business leader looking at whether they will invest in the year ahead, as they face a wall of increased costs and taxes, will have taken little cheer from what they heard,” she said.
The intervention comes amid a growing chorus of concern from business leaders who fear Rishi Sunak, the Prime Minister, and Mr Hunt are failing to present convincing plans to grow Britain’s economy and risk burying enterprise under a weight of taxation. Sir James Dyson, the billionaire technology entrepreneur, wrote in The Telegraph earlier this month that “growth has become a dirty word” under Mr Sunak.
Tony Danker, the director general of the Confederation of British Industry, said at the World Economic Forum in Davos: “Investors are freezing up and the heart of the problem is that we don’t have a plan.”
On Friday, Mr Hunt revealed his four “Es”, which he claimed would help rejuvenate the economy: enterprise, education, employment and “everywhere” – a reference to levelling up.
Business groups, however, savaged Mr Hunt’s plans, with the Institute of Directors calling the policy launch “empty”.
In a further blow, new figures published today place doubts over the Chancellor’s ambitions to get more older people back into the workforce.
Half of over-50s who have dropped out of work are jobless because of longterm sickness or disability, an analysis of figures from the Office for National Statistics (ONS) by Rest Less found.
Encouraging economically inactive people in this age bracket back to work is a major part of the Chancellor’s plans to address persistent labour shortages.
In comments made to The Times over the weekend, Mr Hunt said life for over50s “doesn’t just have to be going to the golf course” and said older workers could “make an enormous contribution”. However, ONS figures show 1.6m over-50s are out of work due to longterm sickness, up 20pc since July 2019.
A Treasury spokesman said “the most important thing we can do for businesses is stick to our plan to halve inflation this year, which together with reducing national debt will deliver the stability needed to grow the economy and create well-paid jobs”.
A Department for Work and Pensions spokesman said: “The department is reviewing workforce participation to understand what action should be taken on increased economic inactivity.”
The BCC’S intervention comes amid worrying signs. The Confederation of British Industry (CBI) said that the services sector, which includes hotels, pubs and restaurants, did 47pc less trade over the festive period in 2022 compared to the year before.
Data from Ey-parthenon, published today, shows 300 profit warnings were issued last year by listed companies, a 50pc spike compared to the year before. About 18pc cut earnings expectations last year. Half cited costs as the reason.
Despite the gloom, figures from Lloyds Bank suggested business confidence had ticked up to a six-month high amid signs inflation had passed its peak.
The Chancellor was right to talk about the need for optimism in his speech last Friday. Many firms tell me they are determined to ride out the headwinds that have stalled our economy and they are constantly looking to adapt and thrive.
But any business leader looking at whether they will invest in the year ahead, as they face a wall of increased costs and taxes, will have taken little cheer from what they heard.
Jeremy’s Hunt’s next Budget will be the Government’s sixth fiscal intervention within a year – double what you’d normally expect to see.
There is no doubt that we are living in unprecedented times – the pandemic is still creating global havoc, war continues to rage in Ukraine and British politics has witnessed months of upheaval.
However, the high number of fiscal fixes and patches speaks to a wider problem – a clear lack of Government strategy to raise productivity and lift the entire UK economy out of the doldrums.
This constant shifting of the sand beneath the feet of businesses as they head into a recession has been a recipe for disaster. Few UK or international companies will commit to invest at the levels we need while there is so little certainty about the Government’s long-term economic strategy.
The British Chambers of Commerce (BCC) data on current business conditions make for sombre reading.
We are currently forecasting a five-quarter recession for the UK economy. Our annual expectation for growth in 2023 is minus 1.3pc and we expect the economy to grow by just 0.7pc in 2024. So, it should come as no surprise that our most recent survey of more than 5,000 businesses across the UK found profitability confidence has returned to Covid-crisis levels, with more businesses (36pc) expecting their profits to decline in the year ahead than are expecting an increase (34pc).
And while inflation is still the biggest worry of four fifths of companies, more are also now citing rising taxation (38pc) and interest rates (43pc) as concerns.
What matters most for business is certainty – that Government sets out a detailed agenda to promote growth for the long-term that they can have some faith in. And while a focus on growing our successful digital, life sciences and creative industries is right, we must not forget about the millions of other businesses in the UK, from plumbers and solicitors to farmers and hairdressers.
The issues around our tight labour market are a case in point. While the Mr Hunt touched on the “employment” issue he provided no answers. If Government is serious about growth, it needs to get serious about jobs. We have more than a million vacancies in the UK, that are stopping firms from taking on new work and throttling their capacity. The Bank of England has consistently flagged the pressure this is placing on inflation as companies are forced to bid up wages in competition for the limited supply of workers.
This, in turn, puts further pressure on the Bank to raise interest rates as the spectre of inflation continues to haunt the economy.
The Chancellor and Prime Minister are both right to target the reduction in inflation, but they must also recognise that if they fail to ease any of the other pressures on business then our recovery from the recession will be much slower.
If the Government takes action on jobs, then it will ease the inflation and interest rate problems too.
This could include supporting greater business investment in workforce training, reforming childcare funding, expanding the use of apprenticeships, and a comprehensive review of the Shortage Occupation List to allow sectors facing urgent demand for skills to get exactly what they need.
Another pressing issue the Chancellor must deal with is energy costs – their impact on firms cannot be underestimated.
While wholesale energy charges might be starting to fall, the reality is that thousands of businesses were locked into new contracts last year at prices that will remain far higher for months to come.
This will be unsustainable for many. That’s why we continue to urge the Government to give Ofgem the power to intervene in the energy market for businesses where it is clear it is no longer operating in a free and fair manner. Mr Hunt must also look at tax breaks for companies which will allow them to invest in energy saving measures that can cut their bills.
The final missing piece of the puzzle in the Chancellor’s speech was exports. Almost two thirds of chamber businesses export but the national average is just one in 10.
The global market is where the biggest prizes for UK firms will be in the years ahead, but for smaller businesses the cost, bureaucracy and complexity of starting to trade overseas seemingly put it out of reach for many.
They need easier access to finance to take their ideas from “concept to country” and they need more support across the whole of that journey to make it happen. Chambers can help with this, they are experts, but Government also needs to get more involved with firms.
What’s needed, overall, is a strategy for the long-term that businesses can believe in and which allows them to plan with confidence.
It is a step in the right direction that the Chancellor has set out his vision for the economy, but the mechanics of delivery matter too.
He should make full use of our 53-strong Chamber Network, which is plugged into local economies across the UK. We must also see policies that encourage investment and give all businesses – not just the unicorns – some vital breathing space to build foundations for the future.
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