Labour’s UK Business Push Fails to Ease Worries Over Policy Void

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(Bloomberg) — British businesses have one key concern about Prime Minster Keir Starmer: Almost three months into his tenure, there’s still a dearth of details about how his new Labour administration plans to get the UK economy firing.

Corporate leaders showed up in their droves to Labour’s annual conference in Liverpool this week, after the long-time opposition stormed to a landslide in the July 4 general election. That’s testament not only to Labour’s return to power after 14 years in opposition, but also to how Starmer has reformed the party to appeal to UK Plc after his left-wing predecessor Jeremy Corbyn largely antagonized business with tax and nationalization plans.

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“We campaigned as a pro-business party and we will govern as a pro-business party,” Business Secretary Jonathan Reynolds said Monday in his conference speech. “We cannot deliver for the British people, unless we turn around the low investment, low productivity, low growth economy which we have inherited.”

Yet despite that improved relationship, business executives are waiting for concrete answers on how Starmer plans to reshape Britain. Meanwhile, speculation is rife about potential levies on capital gains and wealthy people in Chancellor of the Exchequer Rachel Reeves’s budget on Oct. 30, after she all but confirmed over the summer that she’s looking to raise taxes to help plug a £22 billion ($29 billion) fiscal hole. 

“Getting the next six weeks right, I feel, will be really important to people interested in investing here, or to attract people from outside,” Lloyd’s of London Chairman Bruce Carnegie-Brown told Bloomberg Radio at the conference.

Reeves and Starmer have said that promoting economic growth is the chief aim of their administration and stress that attracting private capital will be key to achieving that goal. In her conference speech on Monday, the chancellor hinted at plans that could unlock billions of pounds of investment as she promised to deliver a budget showing “real ambition.” 

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But business executives on the sidelines of the summit — many of whom spoke to Bloomberg on condition of anonymity to discuss sensitive opinions about the new government — expressed caution about Labour’s plans and cited areas where they are still seeking clarity. 

One banking boss said there was a void of several weeks before the important issues of tax and other policy would become clear and allow companies to make plans. Another business leader said Labour’s economic announcements so far amounted to headlines with blank pieces of paper behind them. They criticized Starmer’s failure to swiftly appoint a dedicated investment minister. 

A third executive, who works for one of the world’s largest drinks companies, said they liked Labour’s pro-business message but were worried Reeves would sting them with a hike to alcohol duty at the budget.

“They have made a good start in setting out their agenda, but now everyone is waiting for the budget, and the investment summit and the Mansion House speech,” said Tiina Lee, chief executive officer of Citi UK, referring to a major gathering of investors on Oct. 14 and Reeves’s upcoming annual address to the City, for which no date has yet been announced.

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Reynolds addressed some of industry’s concerns directly during so-called business day at the party conference, whose attendees included executives from HSBC, Google and Blackstone. Tickets for the event cost £3,000 and sold out within 24 hours. The minister said CEOs shouldn’t doubt Labour’s pro-enterprise instincts and that details on the party’s planned industrial strategy would be forthcoming in the near future.

Labour is “explicitly committed to removing barriers to business activity,” he said. “It’s an extremely compelling offer.”

Planning Reforms

Several executives at the summit expressed optimism about the new government’s work to-date. Keith Anderson, chief executive of Scottish Power, said Labour’s energy policy was already making positive strides in key areas such as a pledge to reform planning, in comparison with the previous regime. 

“For years and years, we’ve talked about planning, or how to get things decided more quickly,” Anderson told Bloomberg. There is evidence the new administration will “be serious,” he said, adding that Scottish Power’s Spanish owner Iberdrola would be keen to plow more into the UK.

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Another executive said they were glad that Reeves has committed to capping corporation tax during this Parliament. They also welcomed proposals for an industrial strategy and to facilitate more construction by stripping back planning red tape.

Citi’s Lee said the bank’s international clients appreciated the stability the UK’s new government had said it was bringing. As well as enticing overseas investors, a key challenge will be unleashing the trillions of pounds of pension funds and other savings in the UK for long-term projects, she said.

‘Rich Environment’

Starmer himself closed the event with corporate leaders by talking up his pro-business agenda and the idea that his large electoral mandate will lead to better long-term decision making.

“We can take decisions based on years rather than months,” he said. “There’ll be a very rich environment for investment if we’re clear about the conditions for investment.”

But whether that becomes a reality remains the question for UK plc — and Conrad Ford, chief strategy officer of UK fintech Allica Bank, said that companies needed to hear more.

“What everyone is looking for are signs the rhetoric around growth can be turned into action,” Ford said. “That Labour really are serious about backing the country’s wealth creators.”

—With assistance from Caroline Hepker and James Woolcock.

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