1 00:00:00,040 --> 00:00:03,120 Speaker 1: The UK's most influential business library group, the CBI says 2 00:00:03,120 --> 00:00:06,360 Speaker 1: nearly half of British businesses are planning to cut jobs 3 00:00:06,400 --> 00:00:09,440 Speaker 1: after last month's budgets. We saw the payroll taxes paid 4 00:00:09,440 --> 00:00:13,360 Speaker 1: by employers increase. The Confederation of British Industry's annual conference 5 00:00:13,400 --> 00:00:15,960 Speaker 1: begins today and we've got the CBI's chief economist Louise 6 00:00:15,960 --> 00:00:18,880 Speaker 1: Hallam with us in studio. Morning to you, Louise, So 7 00:00:19,000 --> 00:00:21,239 Speaker 1: you say that firms are in damage control well after 8 00:00:21,239 --> 00:00:22,599 Speaker 1: the budget. What does that look like? 9 00:00:23,400 --> 00:00:23,479 Speaker 2: So? 10 00:00:23,680 --> 00:00:26,439 Speaker 3: I think, as you say, we ran a survey of 11 00:00:26,800 --> 00:00:30,640 Speaker 3: businesses after the budget and half of those came back 12 00:00:30,680 --> 00:00:32,680 Speaker 3: and told us that they will have to think about 13 00:00:33,280 --> 00:00:37,920 Speaker 3: perhaps restructuring and cutting jobs within their workforce. Sixty percent 14 00:00:38,000 --> 00:00:40,919 Speaker 3: said that those who were planning to high will now 15 00:00:40,960 --> 00:00:44,320 Speaker 3: have to cut back on those decisions, and fifty percent 16 00:00:44,360 --> 00:00:48,000 Speaker 3: said that they need to relook at capital investment plans 17 00:00:48,040 --> 00:00:50,080 Speaker 3: as well. So I think whilst in general we were 18 00:00:50,080 --> 00:00:52,800 Speaker 3: hoping that the economy would start to pick up a 19 00:00:52,800 --> 00:00:55,200 Speaker 3: bit more this year, I think the budget has really 20 00:00:55,200 --> 00:00:56,760 Speaker 3: give businesses pause for thought. 21 00:00:57,200 --> 00:00:59,279 Speaker 2: So the CBI was taken by surprise by this. 22 00:00:59,800 --> 00:01:01,840 Speaker 3: Well, I think we all knew that there were going 23 00:01:01,880 --> 00:01:04,319 Speaker 3: to be measures around national insurance in the budget, but 24 00:01:04,400 --> 00:01:06,600 Speaker 3: I think that we have been quite surprised by the 25 00:01:06,640 --> 00:01:09,399 Speaker 3: size of those changes and actually by the way that 26 00:01:09,440 --> 00:01:11,880 Speaker 3: they have been done as well. So that reduction in 27 00:01:11,920 --> 00:01:16,280 Speaker 3: the threshold when you start paying national insurance contributions was 28 00:01:16,400 --> 00:01:20,160 Speaker 3: very large and also really impacts those businesses who do 29 00:01:20,240 --> 00:01:23,600 Speaker 3: have very large workforces, and particularly for those who hire 30 00:01:23,600 --> 00:01:26,480 Speaker 3: people at the lower end of the earnings distribution, which 31 00:01:26,560 --> 00:01:29,560 Speaker 3: obviously combined with the national living wage increases as well, 32 00:01:29,720 --> 00:01:31,800 Speaker 3: means you've got a lot of factors combining to make 33 00:01:31,840 --> 00:01:34,119 Speaker 3: sure it is actually going to be harder to invest 34 00:01:34,840 --> 00:01:36,160 Speaker 3: to hire people in the UK. 35 00:01:36,440 --> 00:01:38,640 Speaker 1: That your organization would have had a lot of contact 36 00:01:38,720 --> 00:01:41,120 Speaker 1: with Rachel Reeves and the Treasury running up to the 37 00:01:41,120 --> 00:01:43,840 Speaker 1: budget as well. Essentially, I mean, the Labour put so 38 00:01:43,959 --> 00:01:46,160 Speaker 1: much effort into paying themselves as the Party of Business 39 00:01:46,160 --> 00:01:48,800 Speaker 1: before the election. Was it that they just didn't tell 40 00:01:48,800 --> 00:01:51,440 Speaker 1: you what they were going to do or that they've 41 00:01:51,560 --> 00:01:53,080 Speaker 1: changed their position. 42 00:01:52,800 --> 00:01:53,320 Speaker 2: On the matter. 43 00:01:53,840 --> 00:01:56,560 Speaker 3: So I mean, I think when we obviously do have 44 00:01:56,600 --> 00:01:58,320 Speaker 3: a lot of engagement with the Treasury, as you said, 45 00:01:58,320 --> 00:02:01,280 Speaker 3: but obviously there are certain sensitivity around tax changers, so 46 00:02:01,360 --> 00:02:03,280 Speaker 3: like I say, I think we knew, as it was 47 00:02:03,320 --> 00:02:05,960 Speaker 3: widely trilled there we'd be these measures around national insurance. 48 00:02:06,000 --> 00:02:08,200 Speaker 3: So you know, we were very much telling them around 49 00:02:08,560 --> 00:02:11,600 Speaker 3: the circumstances for business at the moment, and particularly where actually, 50 00:02:11,840 --> 00:02:14,120 Speaker 3: you know, many businesses have been hit by a lot 51 00:02:14,160 --> 00:02:16,520 Speaker 3: of costs over the last few years with things like COVID, 52 00:02:16,560 --> 00:02:19,800 Speaker 3: the energy crisis, etc. The ability to bear some of 53 00:02:19,880 --> 00:02:23,320 Speaker 3: these additional costs is lower than it might otherwise have been. 54 00:02:23,720 --> 00:02:25,480 Speaker 3: And the other thing that we were doing is talking 55 00:02:25,480 --> 00:02:28,000 Speaker 3: to them about you know, if there are measures like 56 00:02:28,040 --> 00:02:30,119 Speaker 3: this you might need to take, you need to think 57 00:02:30,160 --> 00:02:34,280 Speaker 3: about offsetting measures as well. So for example, they've talked 58 00:02:34,320 --> 00:02:38,640 Speaker 3: about reforming the apprenticeship levy, but we're not really seeing 59 00:02:38,639 --> 00:02:40,880 Speaker 3: reform on that as quickly as we'd like to see. 60 00:02:41,200 --> 00:02:44,000 Speaker 3: We know that inactivity is a big problem for businesses, 61 00:02:44,000 --> 00:02:46,160 Speaker 3: but again there was little in the budget to help 62 00:02:46,760 --> 00:02:50,560 Speaker 3: businesses to support those in poor health within their workforces. 63 00:02:50,720 --> 00:02:52,560 Speaker 3: So I think that there is a lot of work 64 00:02:52,680 --> 00:02:56,000 Speaker 3: that the Chancellor and the Treasury could have done to 65 00:02:56,639 --> 00:03:00,440 Speaker 3: just ease some of this pain for businesses. Unfortunately, you know, 66 00:03:00,480 --> 00:03:02,560 Speaker 3: we've not seen as much as that as we'd like 67 00:03:02,600 --> 00:03:03,040 Speaker 3: to have seen. 68 00:03:03,400 --> 00:03:05,720 Speaker 2: It sounds like the cbr's view is that the Labor 69 00:03:05,760 --> 00:03:08,600 Speaker 2: government made the wrong decisions in the budget, certainly the 70 00:03:08,639 --> 00:03:12,399 Speaker 2: wrong decisions for business. You've placed a lot of importance 71 00:03:12,440 --> 00:03:16,919 Speaker 2: on the government's promised industrial strategy to deliver higher sustainable growth, 72 00:03:16,919 --> 00:03:19,600 Speaker 2: but in the budget that doesn't seem to have delivered 73 00:03:19,600 --> 00:03:20,160 Speaker 2: for business. 74 00:03:20,320 --> 00:03:24,160 Speaker 3: So I think there's no way to escape that for us. 75 00:03:24,360 --> 00:03:27,160 Speaker 3: We see the budget as being very difficult for business, 76 00:03:27,200 --> 00:03:29,640 Speaker 3: but I think you're right, and what we are trying 77 00:03:29,680 --> 00:03:32,640 Speaker 3: to do in those conversations with the government is to 78 00:03:32,680 --> 00:03:35,440 Speaker 3: look at all the measures that they are proposing to 79 00:03:35,480 --> 00:03:38,880 Speaker 3: do and make sure that that collectively does add up 80 00:03:38,920 --> 00:03:43,600 Speaker 3: to a stronger plan for growth. So the industrial strategy, 81 00:03:43,800 --> 00:03:46,280 Speaker 3: as you mentioned, will be incredibly important for that. 82 00:03:46,760 --> 00:03:49,640 Speaker 2: What is going to be in the industrial strategy. Everybody 83 00:03:49,760 --> 00:03:53,080 Speaker 2: understands that there has not been enough economic growth, but 84 00:03:53,160 --> 00:03:55,520 Speaker 2: I have not heard anybody come up with a cogent 85 00:03:55,560 --> 00:04:00,320 Speaker 2: solution of betting on particular sectors, on doing one, two 86 00:04:00,440 --> 00:04:04,760 Speaker 2: or three things that would actually deliver sustainable economic growth 87 00:04:04,840 --> 00:04:07,400 Speaker 2: to the UK. There were some hints in Mansion House 88 00:04:07,440 --> 00:04:10,280 Speaker 2: about rolling back on a bit of regulation. What is 89 00:04:10,320 --> 00:04:12,640 Speaker 2: it that's meant to be in the industrial strategy that 90 00:04:12,640 --> 00:04:13,960 Speaker 2: will deliver growth for Britain. 91 00:04:14,400 --> 00:04:16,520 Speaker 3: So it's obviously out for consultation at the moment and 92 00:04:16,520 --> 00:04:18,520 Speaker 3: will be launched in the spring. But what we're feeding 93 00:04:18,560 --> 00:04:20,400 Speaker 3: into it is, as well as those kind of eight 94 00:04:20,480 --> 00:04:23,440 Speaker 3: sectors as you've alluded to that they've highlighted, they'll focus 95 00:04:23,480 --> 00:04:25,400 Speaker 3: on we do need to make sure that we're not 96 00:04:25,440 --> 00:04:28,159 Speaker 3: forgetting the kind of everyday economy and that so it's 97 00:04:28,200 --> 00:04:30,920 Speaker 3: these points that we've been talking about and making sure 98 00:04:30,960 --> 00:04:34,920 Speaker 3: that you actually have a competitive tax regime in the UK. 99 00:04:35,160 --> 00:04:37,719 Speaker 3: Regulation across the board is thinking about how can we 100 00:04:37,800 --> 00:04:41,200 Speaker 3: be more outcomes based to that, how can we kind 101 00:04:41,200 --> 00:04:44,600 Speaker 3: of cut and make a regulation more efficient in places 102 00:04:44,960 --> 00:04:50,159 Speaker 3: They've obviously made some really important moves towards planning reform, 103 00:04:50,560 --> 00:04:52,800 Speaker 3: but you know that is an area where we still 104 00:04:52,839 --> 00:04:55,719 Speaker 3: need to see significant progress and is a real barrier 105 00:04:55,920 --> 00:04:59,040 Speaker 3: to businesses when they are thinking about expansion, and particularly 106 00:04:59,080 --> 00:05:02,400 Speaker 3: actually when you're thinking about green connectivity, for example, on 107 00:05:02,839 --> 00:05:06,440 Speaker 3: firms trying to move forward on their net zero journey. 108 00:05:06,839 --> 00:05:09,360 Speaker 1: The pain that's evidenced in your survey that businesses are 109 00:05:09,400 --> 00:05:12,400 Speaker 1: feeling today is that something that you feel that you 110 00:05:12,440 --> 00:05:16,640 Speaker 1: have any optimism could be eased as growth returns to 111 00:05:16,680 --> 00:05:19,120 Speaker 1: the economy, does the economic picture look like it might 112 00:05:19,160 --> 00:05:22,039 Speaker 1: actually change that sentiment in the kind of short to 113 00:05:22,080 --> 00:05:22,839 Speaker 1: medium term. 114 00:05:23,600 --> 00:05:25,880 Speaker 3: So I think that what we need to see, as 115 00:05:25,920 --> 00:05:27,799 Speaker 3: I said, is we need to see some of those 116 00:05:28,320 --> 00:05:32,400 Speaker 3: kind of measures to help businesses, particularly if they are 117 00:05:32,440 --> 00:05:36,840 Speaker 3: thinking about perhaps increasing the productivity in their workforce. So 118 00:05:36,880 --> 00:05:39,479 Speaker 3: I talked about skills and the apprenticeship levy, but actually 119 00:05:39,600 --> 00:05:42,839 Speaker 3: things like tech adoption and taking on AI you know, 120 00:05:42,920 --> 00:05:45,760 Speaker 3: will be incredibly important for businesses to try and absorb 121 00:05:46,240 --> 00:05:51,080 Speaker 3: some of these costs. Businesses, you know, are very spectrums 122 00:05:51,440 --> 00:05:53,719 Speaker 3: along their journey. There's lots of businesses that I speak 123 00:05:53,760 --> 00:05:55,600 Speaker 3: to that are leading the charge on that, but actually 124 00:05:55,600 --> 00:05:58,440 Speaker 3: for many, you know, they don't perhaps know where to start. 125 00:05:59,040 --> 00:06:01,200 Speaker 3: And so actually think, you where can the government come 126 00:06:01,200 --> 00:06:03,719 Speaker 3: in with kind of best practice advice and try and 127 00:06:03,760 --> 00:06:06,400 Speaker 3: help businesses at all ends, but particularly in that kind 128 00:06:06,440 --> 00:06:08,960 Speaker 3: of more medium and smaller end of the economy as well. 129 00:06:10,680 --> 00:06:15,960 Speaker 2: In terms of the certainty picture, one of the big 130 00:06:16,240 --> 00:06:20,400 Speaker 2: factors was the decline in business and consumer sentiment, which 131 00:06:20,520 --> 00:06:24,560 Speaker 2: was really surprising. After the election, there had been a 132 00:06:24,560 --> 00:06:27,280 Speaker 2: lot of hope that a new government would bring more 133 00:06:28,040 --> 00:06:30,760 Speaker 2: long term stability just by the fact of being elected 134 00:06:30,800 --> 00:06:34,320 Speaker 2: for five years and that that would therefore you provide 135 00:06:34,320 --> 00:06:38,560 Speaker 2: a bedrock for businesses and consumers. But in fact, sentiment 136 00:06:38,680 --> 00:06:42,480 Speaker 2: surveys plunged after the election. Was that a shock to you? 137 00:06:42,520 --> 00:06:44,880 Speaker 2: Do businesses feel like they have certainty now? 138 00:06:45,839 --> 00:06:48,440 Speaker 3: So I think that we definitely did see that in 139 00:06:48,480 --> 00:06:52,280 Speaker 3: a lot of our conversations, particularly overthrow the summer going 140 00:06:52,320 --> 00:06:54,680 Speaker 3: in the autumn, and we're now seeing that reflected in 141 00:06:54,760 --> 00:06:57,760 Speaker 3: some of the ecademic data that we're having coming through. 142 00:06:58,680 --> 00:07:01,200 Speaker 3: I think that, you know, again, when I spook to 143 00:07:01,200 --> 00:07:03,080 Speaker 3: the Chance ahead of the budget, she was talking a 144 00:07:03,080 --> 00:07:05,159 Speaker 3: lot about let's get the bad news out, let's draw 145 00:07:05,160 --> 00:07:07,360 Speaker 3: the line in the sand, and then move on for growth. 146 00:07:07,480 --> 00:07:10,440 Speaker 3: I mean, I think if the budget, you know, is 147 00:07:10,480 --> 00:07:13,280 Speaker 3: all of the bad news, then hopefully we can be 148 00:07:13,360 --> 00:07:15,160 Speaker 3: more optimistic going forward. And like I said, I think 149 00:07:15,160 --> 00:07:17,040 Speaker 3: there's lots of elements that we do want to work 150 00:07:17,240 --> 00:07:22,320 Speaker 3: really constructively with government on. But I think that obviously, 151 00:07:22,880 --> 00:07:25,760 Speaker 3: you know, the measures in the budget were so large 152 00:07:25,920 --> 00:07:29,000 Speaker 3: that you know, they have, as we said, really impacted 153 00:07:29,040 --> 00:07:32,680 Speaker 3: that business confidence and so I think that that does 154 00:07:32,840 --> 00:07:36,120 Speaker 3: make that job of increasing growth in the UK economy 155 00:07:36,120 --> 00:07:36,800 Speaker 3: that much harder. 156 00:07:37,200 --> 00:07:40,400 Speaker 1: How worried are you remembers about what policies could be 157 00:07:40,440 --> 00:07:44,280 Speaker 1: implemented by the Trump administration in the US, potentially tariffs. 158 00:07:43,920 --> 00:07:47,560 Speaker 3: For example, So I think tariffs is obviously a big 159 00:07:47,600 --> 00:07:50,440 Speaker 3: area for concern at the moment. So yeah, we're talking 160 00:07:50,440 --> 00:07:53,480 Speaker 3: to members at the moment to understand some of that sentiment. 161 00:07:53,560 --> 00:07:57,320 Speaker 3: I think obviously it's too early to tell exactly how 162 00:07:57,400 --> 00:08:01,160 Speaker 3: large some of those tariffs could be and across witch sectors, 163 00:08:01,200 --> 00:08:02,960 Speaker 3: and obviously there is a bit of a question as 164 00:08:03,000 --> 00:08:06,760 Speaker 3: to how much the UK might be affected versus particularly 165 00:08:06,880 --> 00:08:09,680 Speaker 3: China and the US. So that's something we're definitely keeping 166 00:08:09,720 --> 00:08:12,080 Speaker 3: a watch on and is a concern for many members. 167 00:08:12,080 --> 00:08:14,160 Speaker 3: I think. One of the other areas with the Trump 168 00:08:14,200 --> 00:08:17,400 Speaker 3: administration is obviously, you know, they might cut back on 169 00:08:17,440 --> 00:08:20,280 Speaker 3: some of their defense spending, which might put more pressure 170 00:08:20,360 --> 00:08:23,440 Speaker 3: on the UK and the EU. Again talking about some 171 00:08:23,520 --> 00:08:25,280 Speaker 3: of the factors that the government is going to have 172 00:08:25,320 --> 00:08:27,280 Speaker 3: to deal with over the next couple of months in 173 00:08:27,360 --> 00:08:30,239 Speaker 3: the spending review. Again, that's got a dynamic there which 174 00:08:30,880 --> 00:08:32,600 Speaker 3: you know we'll be watching very closely as well. 175 00:08:32,720 --> 00:08:35,280 Speaker 2: Okay, one of your colleagues at the CBI, after the 176 00:08:35,320 --> 00:08:38,000 Speaker 2: third quarter GDP data out of the UK, which showed 177 00:08:38,840 --> 00:08:44,400 Speaker 2: growth stalling, basically talked about uncertainty. What blamed uncertainty ahead 178 00:08:44,400 --> 00:08:47,320 Speaker 2: of the budget for that slowdown in an economic growth 179 00:08:47,360 --> 00:08:52,160 Speaker 2: and also talked about downside risks to the outlook have increased. 180 00:08:53,040 --> 00:08:53,520 Speaker 1: What is that? 181 00:08:53,960 --> 00:08:57,080 Speaker 2: Why is that that the downside risks now to growth 182 00:08:57,120 --> 00:09:00,840 Speaker 2: going forwards have actually increased as far as the CBS concerned. 183 00:09:01,160 --> 00:09:03,040 Speaker 3: So I think, like we say, that is very much 184 00:09:03,200 --> 00:09:08,960 Speaker 3: around confidence and particularly around business and consumer sentiments. So 185 00:09:09,840 --> 00:09:12,320 Speaker 3: I think businesses, like we say, are having to pull 186 00:09:12,360 --> 00:09:14,920 Speaker 3: back investment, and that's one because of the cost pressures, 187 00:09:15,200 --> 00:09:18,120 Speaker 3: but also because they can see demand has not quite 188 00:09:18,160 --> 00:09:20,040 Speaker 3: picked up in the economy as we'd like it to 189 00:09:20,080 --> 00:09:23,720 Speaker 3: have done. So we are seeing wage growth strengthen, for example, 190 00:09:23,800 --> 00:09:27,640 Speaker 3: and obviously we've now seen those very high inflation rates 191 00:09:27,640 --> 00:09:30,560 Speaker 3: come down, which is really positive, but consumers aren't quite 192 00:09:30,559 --> 00:09:32,560 Speaker 3: getting out and spending as much as we'd have liked 193 00:09:32,600 --> 00:09:35,840 Speaker 3: to have seen. So we're hoping, obviously for many businesses 194 00:09:35,840 --> 00:09:38,720 Speaker 3: in this pre Christmas period that that will be more positive. 195 00:09:39,000 --> 00:09:41,880 Speaker 3: But at the moment, again that hasn't given business to 196 00:09:41,920 --> 00:09:44,599 Speaker 3: the confidence to invest on the back of that demand. 197 00:09:44,559 --> 00:09:47,120 Speaker 1: Okay, Louise, thank you very much for joining us. Louise Hallum, 198 00:09:47,120 --> 00:09:50,760 Speaker 1: the CBI's chief economist, joining us in studio ahead of 199 00:09:50,800 --> 00:09:54,120 Speaker 1: the start of their annual conference which begins a little 200 00:09:54,120 --> 00:09:56,600 Speaker 1: bit later this morning as well. So very interesting to 201 00:09:56,600 --> 00:09:59,600 Speaker 1: see what comes out of those conversations. Is that survey 202 00:09:59,679 --> 00:10:01,920 Speaker 1: set up it up with showing that nearly half of 203 00:10:02,000 --> 00:10:04,839 Speaker 1: British firms are planning to cut jobs after the tax 204 00:10:04,920 --> 00:10:06,160 Speaker 1: changes in the budget.