At the CBI’s Annual Conference, CBI CEO Rain Newton-Smith will today (Monday 25 Nov) say that “margins are being squeezed and profits are being hit” and when you “hit profits, you hit competitiveness, you hit investment, you hit growth.”
In her first major speech since the Autumn Budget, Newton-Smith will commend the government for “drawing the curtain on a near decade of instability” but urge them to shift from consultation to co-design.
The CBI’s post-Budget survey revealed that nearly two-thirds of firms reported that the Budget will damage UK investment with half of firms looking to reduce headcount as a result. Calling for closer collaboration between firms and government, Newton-Smith will argue that “tax rises like this must never again simply be done to business.”
Newton-Smith will praise the government for action in areas where they have drawn on the insight of business, citing the business tax roadmap as an example, but will call for an “elevated partnership for a higher purpose” to deliver on the government’s growth ambitions.
Launching the CBI’s new Blueprint for Competitiveness, a policy framework for enhancing the UK’s competitiveness against a shifting global landscape, Newton-Smith will highlight the importance of “public-private partnerships built for success” as holding the key for “transforming economic challenges into opportunities for sustained growth.”
In her speech, Newton-Smith will call for that partnership to be put into action in three key areas to turbocharge the UK’s growth prospects:
- Action on the pressing challenges facing business, including a faster more transformative timetable for business rates reform, flexibility on the apprenticeship levy, and boosting occupational health incentives to support the health of the workforce.
- Build for the long-term by using the Industrial Strategy to mobilise the “everyday economy” behind the races the UK can win, through strategic use of the UK’s national assets, its diverse industrial base and capital markets; an international outlook; and a strong focus on skills at its core, as set out in the CBI’s new Blueprint for Competitiveness.
- Pull key growth levers to get the economy moving, by going further on tech adoption, planning reform, and regulation.
Speaking at the CBI’s Annual Conference 2024, Rain Newton-Smith will say:
“Right now, we – this country, this government, this room of brilliant business leaders, we are standing on a shoreline. And in the distance, there’s an island: a vision of growth. The real, long-term sustainable growth that we so badly need.
It’s a vision we all share. It’s a vision the Prime Minister and Chancellor have set out with strength and determination. It’s a vision we in business feel down to our very bones.
But what we must all understand… is that there is only one force that can bridge that gap. Only one force that can make that vision a reality. That’s the people in this room. It’s the ingenuity, the ideas and the investment of business.
Business is the innovative power in the UK. All of industry, corporations, further education, our great universities. You are the true engine of sustainable growth. The ones who are quietly creating jobs, opportunities, and better quality of life in your communities.
But it’s been a tough few years and often the ingenuity of industry has been spent just fighting fires. Boardrooms have been crying out for stability, optimism and the possibility of thinking for the long-term again.
That’s what we’ve been pressing this government for. Be bold, be brave, give hope and have confidence.
And we saw the Chancellor deliver on that in part – with stability in our public finances, with the brave decision to create space in our fiscal rules for capital spending. And the corporate tax roadmap we called for, to give business certainty for the long-term.
While things remain uncertain abroad, this government has put us in a strong position by drawing the curtain on a near-decade of instability at home.
What people are calling the “dullness dividend” of stability.”
On the importance of a profitable UK plc, Newton-Smith will say:
Profit’s not a bad word:
“But the challenge for all of us is when we look out across the water to our island of growth.
When we look at OBR forecasts for just 1.5 per cent growth by the end of this Parliament.
That island we’re reaching for is still a long way off.
That’s because stability is a precondition, not a blueprint, for growth.
The missing piece – the steel supports that hold the whole bridge up – that’s investment.
Above all, it’s corporate Britain. Because vital as they are for employment, for every £1 an SME invests, larger firms invest £500.
What really defines growth – is the decisions made in boardrooms up and down the country.
It’s CFOs and CEOs asking: can we afford to invest? Can we afford to expand? Can we afford to take a chance on new people?
Well after the Budget, the answer we’re hearing from so many firms is still – not yet.
The rise in National Insurance and the stark lowering of the threshold, caught us all off guard.
Set alongside the expansion and rise of the National Living Wage – which everyone wants to accommodate – and the potential cost of the Employment Rights Bill changes… they put a heavy burden on business.
When firms I speak to want to be creating more opportunities, more investment, more training in their local communities…instead so many – especially in retail and hospitality – have gone into crisis containment.
Even where the risk isn’t critical, firms that have been through really tough years are now in damage control again.
They are looking with heavy hearts to cut training and investment, delay decarbonisation projects, or pass on costs to customers.
Then there’s the farming sector and family business. Just days ago farmers marched past this conference centre in their thousands. On top of NICs and all the other measures, they’ve had changes to inheritance tax and business property relief.
Some see those solely as personal taxes, but these companies are where the professional is personal. And too many are fearful of the impact – fearful they can’t pass their livelihoods to future generations.
Across the board, in so many sectors, margins are being squeezed and profits are being hit…by a tough trading environment that just got tougher.
And here’s the rub: profits aren’t just extra money for companies to stuff in a pillowcase. Profits are investment.
Your profitability shapes your ability to invest and grow sustainably. Your future profitability is your reason to invest.
And from the leaders I talk to, they are clear – responsible business is using profit to solve the problems of people and planet.
That’s why profit’s not a bad thing. It’s not a dirty word.
If you’re a multinational, profits are projects that create new jobs in the UK rather than elsewhere.
If you’re a low margin business, profits are pay rises, health benefits, tech investments.
And if you’re a small business, profits are survival.
When you hit profits, you hit competitiveness, you hit investment. You hit growth.
Almost two-thirds of firms told us this Budget will damage UK investment.
That’s why we’re still so far from that island. From the growth the Chancellor has rightly said – matters “not only for politics, but for people’s livelihoods and life ambitions.”
On action required to stimulate growth, Newton-Smith will say:
“Tax rises like this must never again be simply done to business.
That’s the road to unintended consequences. From now on we need an elevated partnership for a higher purpose.
Too many businesses are having to compromise on their plans for growth.
We can’t let that stand and not act.
NICs rises are one lever government has chosen to pull, that’s piled on the pressure. So we must open a valve to ease that.
Let’s speed up fixing our broken business rates system.
And right now, there are 9 million working-age people out of the labour force.
Getting them back in and raising productivity are mission critical not only for growth, but for the wellbeing, the life opportunities of those people.
Business is absolutely essential for that – but the Budget just made it harder for firms to take a chance on people.
Our survey showed half are now looking to reduce headcount. And almost two-thirds are looking to cut their plans to hire.
The OBR says the National Insurance rises alone will reduce labour supply by 50,000.
Well, making occupational health tax-free would stop 34,000 people dropping out of the workforce.
The Budget also announced £40 million for the new Growth and Skills Levy.
But what we need is immediate flexibility in the apprenticeship levy… so firms can use the funds for the training they need right now.
If you look at the most successful economies of the last 50 years, there’s one common denominator… a strong, clear and modern industrial strategy.
We’ve got a commitment from government to that strategy for the UK– co-signed by the Business Secretary, and the Chancellor.
It needs to dodge the bear-trap for any industrial strategy – of trying to be all things to all people.
And what’s not yet clear, is how business in the everyday economy – the large employers who are often the first step into the world of work, the unsung heroes in our communities – are built into its DNA.
Because I can tell you: if you don’t do that – your industrial strategy will not stand the test of time.
So today, I’m proud to say the CBI is launching its own Blueprint for Competitiveness – to help government do just that. It’s not just our contribution to the Industrial Strategy debate.
It’s a guide for how government and industry can work together on UK competitiveness. How we transform economic challenges into opportunities to grow again.
How we face shifts in the global economy and build resilience against future shocks. It’s a clear framework for how the UK stays competitive. All through public-private partnerships, built for success.
We need a big heave on the enablers of growth
Government has some bold first steps – but we must turn those into big leaps.
On regulation, the Chancellor’s Mansion House speech committed to putting risk appetite back in our toolbox for growth. Now we need the same approach for regulation across sectors.
On planning, it’s not only a simpler system but greater capacity to deliver on the upsurge in demand.
On tax, our complicated rulebook craves simplification that is bold … and digitalisation that saves business time.
On tech adoption, there’s extra support for manufacturers through Made Smarter.
But if we can push that to more sectors, if we can get just 25 per cent more small firms adopting new tech. Then we can add £45bn to our economy by the end of the decade.
So let’s get to it – fast.”
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