Chancellor Rachel Reeves was on a rescue mission when she arrived in London on Thursday evening.
Labour’s relationship with business, which had been carefully nurtured over years of breakfast meetings before the July election, was strained after last month’s tax hike Budget.
Mingling at a champagne reception ahead of a Mansion House address, an executive who publicly supported the party before the election complained that he had been “quiet” since taking office.
Another industry leader added that the government needs to do a much better job of explaining its policies.
The mood was in stark contrast to the drinks reception at Downing Street’s Rose Garden shortly after Labour’s election victory, where executives heralded a period of political stability and the party’s “partnership” with the corporate world.
This optimism has been tested by reforms to workers’ rights which will cost businesses up to £5bn a year and a budget which increased the minimum wage and employers’ national insurance payments – albeit by small amounts. Businesses were partially protected.
“I don’t believe they understand business at all,” lamented one city grandee, who said ministers were no longer listening to him.
“There is . . . a strong feeling among business leaders that I talk to with this policy is being done for business rather than designed with them,” said CBI boss Ryan Newton-Smith.
In his speech to city executives Thursday, Reeves insisted that restoring “stability” to public finances was a necessary first step to spur growth and investment.
His support for deregulation in areas such as bankers’ pay and supervision of senior managers was well received in the room.
Similarly, the speech’s flagship policy of consolidating smaller pension schemes into “mega funds” to try to turbocharge investment was welcomed by financial services companies.
It followed the Budget’s decision not to impose the full 45p tax rate on private equity owners’ bonuses as previously threatened, another move that drew cheers in the City.
But these city-friendly measures have not convinced businesses in other sectors that the government has shown it can fulfill its “mission” to kick-start economic growth.
“The narrative around growth was somewhat absent,” analysts at Boston Consulting Group wrote to clients after the budget, adding that the measures amounted to fiscal tinkering rather than “economic strategy.”
Meanwhile, many businesses are left with what the CBI calls a high-cost “triple whammy”.
“The cumulative effect of all these changes is huge for the industry to be able to move forward and invest and grow,” Andrew Higginson, chairman of retailer JD Sports, told the BBC this week. He said while giving.
Higginson’s intervention was notable as he was the only sitting chair or chief executive of a FTSE 100 company to sign a public letter supporting Labor before the election.
“The firms we represent are scratching their heads to see how they can grow if their costs are rising,” said Alex Veitch, director of policy at the British Chambers of Commerce.
BCC has a good relationship with the government. . . But our conversations are increasingly being dominated by frustration with our membership whose businesses are now facing rising costs”, he said.
The chair of one of Britain’s biggest employers said “you have to have a lot of faith” to believe the government’s plans will deliver the growth it promises.
Official growth forecasts do not include the potential impact of planned reforms, such as streamlining the planning system, which ministers hope will spur investment and boost growth. The government has also promised a comprehensive industrial strategy in the new year.
Unrest has been rife since Labor took power.
In September, the chair of one of the FTSE’s most valuable companies told the Financial Times that the party’s strategy was to “prioritise growth while at the same time weakening all the levers of growth”.
Businesses say many of the meetings since the election have lacked substance, with ministers at the party’s annual conference in Liverpool in September and its international investment summit in London in October calling them ” Broadcast”.
At the summit, Starmer’s pledge to “tear down” bureaucracy to spur investment by businesses was well received. But several executives said the details were lacking.
A UK executive at a multinational said his company boss had left for a summit but was unimpressed: no one from the government had spoken to him all day and officials were only focused on planning. The company was focused on investments that they could announce at the end of the event. Around £63bn of plans were unveiled at the meeting.
At a private lunch in the city on the eve of the budget, directors of more than a dozen companies lashed out at the party’s failure to prepare the government, the long wait between the election and the budget and what they saw as a genuine failure by ministers. He regretted it. Board business ideas.
After his first four months in office, the warmest reception for the party’s policies has come from sectors set to benefit directly, such as energy or infrastructure groups.
Claudio Descalzi, chief executive of Italian energy producer Eni, which has invested in carbon capture and storage projects in the UK, praised the government. He said its £22bn commitment to carbon capture and hydrogen projects and its “speed in defining the regulatory framework and approving projects” were “clear evidence of how governments and industry can work together”. can do”.
A person close to Business Secretary Jonathan Reynolds insisted the government was listening to companies. “Parts of the budget that could have been worse for business were softened to take into account the concerns they raised,” the person said.
“Ministers worked hard to build goodwill with business with extensive engagement before the election. They may be using some of that capital now but that goodwill at least means the door is open. Still open.
The government said that Reeves and Reynolds had “constructive meetings with hundreds of business leaders across the UK representing companies of all sizes and sectors”, and that the government had “delivered on its number one mission of growing growth”. Since day one, we have worked in partnership with the economy.
Some business groups have refrained from overly critical of the government but have privately warned officials that they will only do so for so long if they believe they are not being noticed, a lobbyist said. has been
Kate Nicholls, chief executive of industry group UKHospitality, said business engagement with Labor had not broken but that the relationship was different now that the party had come to power.
The industry has been hit the hardest by the increase in employment costs in the budget.
“You’ve got the promise of mountains of sunlight in a year or 18 months, when the reforms kick in, when the economy picks up,” Nichols said. “But in the meantime, you’ve got a world of pain to navigate.”
Additional reporting by Malcolm Moore and Peter Foster
