WEBVTT - CBI Chief Economist Talks Job Cut Expectations 0:00:00.040 --> 0:00:03.120 The UK's most influential business library group, the CBI says 0:00:03.120 --> 0:00:06.360 nearly half of British businesses are planning to cut jobs 0:00:06.400 --> 0:00:09.440 after last month's budgets. We saw the payroll taxes paid 0:00:09.440 --> 0:00:13.360 by employers increase. The Confederation of British Industry's annual conference 0:00:13.400 --> 0:00:15.960 begins today and we've got the CBI's chief economist Louise 0:00:15.960 --> 0:00:18.880 Hallam with us in studio. Morning to you, Louise, So 0:00:19.000 --> 0:00:21.239 you say that firms are in damage control well after 0:00:21.239 --> 0:00:22.599 the budget. What does that look like? 0:00:23.400 --> 0:00:23.479 So? 0:00:23.680 --> 0:00:26.439 I think, as you say, we ran a survey of 0:00:26.800 --> 0:00:30.640 businesses after the budget and half of those came back 0:00:30.680 --> 0:00:32.680 and told us that they will have to think about 0:00:33.280 --> 0:00:37.920 perhaps restructuring and cutting jobs within their workforce. Sixty percent 0:00:38.000 --> 0:00:40.919 said that those who were planning to high will now 0:00:40.960 --> 0:00:44.320 have to cut back on those decisions, and fifty percent 0:00:44.360 --> 0:00:48.000 said that they need to relook at capital investment plans 0:00:48.040 --> 0:00:50.080 as well. So I think whilst in general we were 0:00:50.080 --> 0:00:52.800 hoping that the economy would start to pick up a 0:00:52.800 --> 0:00:55.200 bit more this year, I think the budget has really 0:00:55.200 --> 0:00:56.760 give businesses pause for thought. 0:00:57.200 --> 0:00:59.279 So the CBI was taken by surprise by this. 0:00:59.800 --> 0:01:01.840 Well, I think we all knew that there were going 0:01:01.880 --> 0:01:04.319 to be measures around national insurance in the budget, but 0:01:04.400 --> 0:01:06.600 I think that we have been quite surprised by the 0:01:06.640 --> 0:01:09.399 size of those changes and actually by the way that 0:01:09.440 --> 0:01:11.880 they have been done as well. So that reduction in 0:01:11.920 --> 0:01:16.280 the threshold when you start paying national insurance contributions was 0:01:16.400 --> 0:01:20.160 very large and also really impacts those businesses who do 0:01:20.240 --> 0:01:23.600 have very large workforces, and particularly for those who hire 0:01:23.600 --> 0:01:26.480 people at the lower end of the earnings distribution, which 0:01:26.560 --> 0:01:29.560 obviously combined with the national living wage increases as well, 0:01:29.720 --> 0:01:31.800 means you've got a lot of factors combining to make 0:01:31.840 --> 0:01:34.119 sure it is actually going to be harder to invest 0:01:34.840 --> 0:01:36.160 to hire people in the UK. 0:01:36.440 --> 0:01:38.640 That your organization would have had a lot of contact 0:01:38.720 --> 0:01:41.120 with Rachel Reeves and the Treasury running up to the 0:01:41.120 --> 0:01:43.840 budget as well. Essentially, I mean, the Labour put so 0:01:43.959 --> 0:01:46.160 much effort into paying themselves as the Party of Business 0:01:46.160 --> 0:01:48.800 before the election. Was it that they just didn't tell 0:01:48.800 --> 0:01:51.440 you what they were going to do or that they've 0:01:51.560 --> 0:01:53.080 changed their position. 0:01:52.800 --> 0:01:53.320 On the matter. 0:01:53.840 --> 0:01:56.560 So I mean, I think when we obviously do have 0:01:56.600 --> 0:01:58.320 a lot of engagement with the Treasury, as you said, 0:01:58.320 --> 0:02:01.280 but obviously there are certain sensitivity around tax changers, so 0:02:01.360 --> 0:02:03.280 like I say, I think we knew, as it was 0:02:03.320 --> 0:02:05.960 widely trilled there we'd be these measures around national insurance. 0:02:06.000 --> 0:02:08.200 So you know, we were very much telling them around 0:02:08.560 --> 0:02:11.600 the circumstances for business at the moment, and particularly where actually, 0:02:11.840 --> 0:02:14.120 you know, many businesses have been hit by a lot 0:02:14.160 --> 0:02:16.520 of costs over the last few years with things like COVID, 0:02:16.560 --> 0:02:19.800 the energy crisis, etc. The ability to bear some of 0:02:19.880 --> 0:02:23.320 these additional costs is lower than it might otherwise have been. 0:02:23.720 --> 0:02:25.480 And the other thing that we were doing is talking 0:02:25.480 --> 0:02:28.000 to them about you know, if there are measures like 0:02:28.040 --> 0:02:30.119 this you might need to take, you need to think 0:02:30.160 --> 0:02:34.280 about offsetting measures as well. So for example, they've talked 0:02:34.320 --> 0:02:38.640 about reforming the apprenticeship levy, but we're not really seeing 0:02:38.639 --> 0:02:40.880 reform on that as quickly as we'd like to see. 0:02:41.200 --> 0:02:44.000 We know that inactivity is a big problem for businesses, 0:02:44.000 --> 0:02:46.160 but again there was little in the budget to help 0:02:46.760 --> 0:02:50.560 businesses to support those in poor health within their workforces. 0:02:50.720 --> 0:02:52.560 So I think that there is a lot of work 0:02:52.680 --> 0:02:56.000 that the Chancellor and the Treasury could have done to 0:02:56.639 --> 0:03:00.440 just ease some of this pain for businesses. Unfortunately, you know, 0:03:00.480 --> 0:03:02.560 we've not seen as much as that as we'd like 0:03:02.600 --> 0:03:03.040 to have seen. 0:03:03.400 --> 0:03:05.720 It sounds like the cbr's view is that the Labor 0:03:05.760 --> 0:03:08.600 government made the wrong decisions in the budget, certainly the 0:03:08.639 --> 0:03:12.399 wrong decisions for business. You've placed a lot of importance 0:03:12.440 --> 0:03:16.919 on the government's promised industrial strategy to deliver higher sustainable growth, 0:03:16.919 --> 0:03:19.600 but in the budget that doesn't seem to have delivered 0:03:19.600 --> 0:03:20.160 for business. 0:03:20.320 --> 0:03:24.160 So I think there's no way to escape that for us. 0:03:24.360 --> 0:03:27.160 We see the budget as being very difficult for business, 0:03:27.200 --> 0:03:29.640 but I think you're right, and what we are trying 0:03:29.680 --> 0:03:32.640 to do in those conversations with the government is to 0:03:32.680 --> 0:03:35.440 look at all the measures that they are proposing to 0:03:35.480 --> 0:03:38.880 do and make sure that that collectively does add up 0:03:38.920 --> 0:03:43.600 to a stronger plan for growth. So the industrial strategy, 0:03:43.800 --> 0:03:46.280 as you mentioned, will be incredibly important for that. 0:03:46.760 --> 0:03:49.640 What is going to be in the industrial strategy. Everybody 0:03:49.760 --> 0:03:53.080 understands that there has not been enough economic growth, but 0:03:53.160 --> 0:03:55.520 I have not heard anybody come up with a cogent 0:03:55.560 --> 0:04:00.320 solution of betting on particular sectors, on doing one, two 0:04:00.440 --> 0:04:04.760 or three things that would actually deliver sustainable economic growth 0:04:04.840 --> 0:04:07.400 to the UK. There were some hints in Mansion House 0:04:07.440 --> 0:04:10.280 about rolling back on a bit of regulation. What is 0:04:10.320 --> 0:04:12.640 it that's meant to be in the industrial strategy that 0:04:12.640 --> 0:04:13.960 will deliver growth for Britain. 0:04:14.400 --> 0:04:16.520 So it's obviously out for consultation at the moment and 0:04:16.520 --> 0:04:18.520 will be launched in the spring. But what we're feeding 0:04:18.560 --> 0:04:20.400 into it is, as well as those kind of eight 0:04:20.480 --> 0:04:23.440 sectors as you've alluded to that they've highlighted, they'll focus 0:04:23.480 --> 0:04:25.400 on we do need to make sure that we're not 0:04:25.440 --> 0:04:28.159 forgetting the kind of everyday economy and that so it's 0:04:28.200 --> 0:04:30.920 these points that we've been talking about and making sure 0:04:30.960 --> 0:04:34.920 that you actually have a competitive tax regime in the UK. 0:04:35.160 --> 0:04:37.719 Regulation across the board is thinking about how can we 0:04:37.800 --> 0:04:41.200 be more outcomes based to that, how can we kind 0:04:41.200 --> 0:04:44.600 of cut and make a regulation more efficient in places 0:04:44.960 --> 0:04:50.159 They've obviously made some really important moves towards planning reform, 0:04:50.560 --> 0:04:52.800 but you know that is an area where we still 0:04:52.839 --> 0:04:55.719 need to see significant progress and is a real barrier 0:04:55.920 --> 0:04:59.040 to businesses when they are thinking about expansion, and particularly 0:04:59.080 --> 0:05:02.400 actually when you're thinking about green connectivity, for example, on 0:05:02.839 --> 0:05:06.440 firms trying to move forward on their net zero journey. 0:05:06.839 --> 0:05:09.360 The pain that's evidenced in your survey that businesses are 0:05:09.400 --> 0:05:12.400 feeling today is that something that you feel that you 0:05:12.440 --> 0:05:16.640 have any optimism could be eased as growth returns to 0:05:16.680 --> 0:05:19.120 the economy, does the economic picture look like it might 0:05:19.160 --> 0:05:22.039 actually change that sentiment in the kind of short to 0:05:22.080 --> 0:05:22.839 medium term. 0:05:23.600 --> 0:05:25.880 So I think that what we need to see, as 0:05:25.920 --> 0:05:27.799 I said, is we need to see some of those 0:05:28.320 --> 0:05:32.400 kind of measures to help businesses, particularly if they are 0:05:32.440 --> 0:05:36.840 thinking about perhaps increasing the productivity in their workforce. So 0:05:36.880 --> 0:05:39.479 I talked about skills and the apprenticeship levy, but actually 0:05:39.600 --> 0:05:42.839 things like tech adoption and taking on AI you know, 0:05:42.920 --> 0:05:45.760 will be incredibly important for businesses to try and absorb 0:05:46.240 --> 0:05:51.080 some of these costs. Businesses, you know, are very spectrums 0:05:51.440 --> 0:05:53.719 along their journey. There's lots of businesses that I speak 0:05:53.760 --> 0:05:55.600 to that are leading the charge on that, but actually 0:05:55.600 --> 0:05:58.440 for many, you know, they don't perhaps know where to start. 0:05:59.040 --> 0:06:01.200 And so actually think, you where can the government come 0:06:01.200 --> 0:06:03.719 in with kind of best practice advice and try and 0:06:03.760 --> 0:06:06.400 help businesses at all ends, but particularly in that kind 0:06:06.440 --> 0:06:08.960 of more medium and smaller end of the economy as well. 0:06:10.680 --> 0:06:15.960 In terms of the certainty picture, one of the big 0:06:16.240 --> 0:06:20.400 factors was the decline in business and consumer sentiment, which 0:06:20.520 --> 0:06:24.560 was really surprising. After the election, there had been a 0:06:24.560 --> 0:06:27.280 lot of hope that a new government would bring more 0:06:28.040 --> 0:06:30.760 long term stability just by the fact of being elected 0:06:30.800 --> 0:06:34.320 for five years and that that would therefore you provide 0:06:34.320 --> 0:06:38.560 a bedrock for businesses and consumers. But in fact, sentiment 0:06:38.680 --> 0:06:42.480 surveys plunged after the election. Was that a shock to you? 0:06:42.520 --> 0:06:44.880 Do businesses feel like they have certainty now? 0:06:45.839 --> 0:06:48.440 So I think that we definitely did see that in 0:06:48.480 --> 0:06:52.280 a lot of our conversations, particularly overthrow the summer going 0:06:52.320 --> 0:06:54.680 in the autumn, and we're now seeing that reflected in 0:06:54.760 --> 0:06:57.760 some of the ecademic data that we're having coming through. 0:06:58.680 --> 0:07:01.200 I think that, you know, again, when I spook to 0:07:01.200 --> 0:07:03.080 the Chance ahead of the budget, she was talking a 0:07:03.080 --> 0:07:05.159 lot about let's get the bad news out, let's draw 0:07:05.160 --> 0:07:07.360 the line in the sand, and then move on for growth. 0:07:07.480 --> 0:07:10.440 I mean, I think if the budget, you know, is 0:07:10.480 --> 0:07:13.280 all of the bad news, then hopefully we can be 0:07:13.360 --> 0:07:15.160 more optimistic going forward. And like I said, I think 0:07:15.160 --> 0:07:17.040 there's lots of elements that we do want to work 0:07:17.240 --> 0:07:22.320 really constructively with government on. But I think that obviously, 0:07:22.880 --> 0:07:25.760 you know, the measures in the budget were so large 0:07:25.920 --> 0:07:29.000 that you know, they have, as we said, really impacted 0:07:29.040 --> 0:07:32.680 that business confidence and so I think that that does 0:07:32.840 --> 0:07:36.120 make that job of increasing growth in the UK economy 0:07:36.120 --> 0:07:36.800 that much harder. 0:07:37.200 --> 0:07:40.400 How worried are you remembers about what policies could be 0:07:40.440 --> 0:07:44.280 implemented by the Trump administration in the US, potentially tariffs. 0:07:43.920 --> 0:07:47.560 For example, So I think tariffs is obviously a big 0:07:47.600 --> 0:07:50.440 area for concern at the moment. So yeah, we're talking 0:07:50.440 --> 0:07:53.480 to members at the moment to understand some of that sentiment. 0:07:53.560 --> 0:07:57.320 I think obviously it's too early to tell exactly how 0:07:57.400 --> 0:08:01.160 large some of those tariffs could be and across witch sectors, 0:08:01.200 --> 0:08:02.960 and obviously there is a bit of a question as 0:08:03.000 --> 0:08:06.760 to how much the UK might be affected versus particularly 0:08:06.880 --> 0:08:09.680 China and the US. So that's something we're definitely keeping 0:08:09.720 --> 0:08:12.080 a watch on and is a concern for many members. 0:08:12.080 --> 0:08:14.160 I think. One of the other areas with the Trump 0:08:14.200 --> 0:08:17.400 administration is obviously, you know, they might cut back on 0:08:17.440 --> 0:08:20.280 some of their defense spending, which might put more pressure 0:08:20.360 --> 0:08:23.440 on the UK and the EU. Again talking about some 0:08:23.520 --> 0:08:25.280 of the factors that the government is going to have 0:08:25.320 --> 0:08:27.280 to deal with over the next couple of months in 0:08:27.360 --> 0:08:30.239 the spending review. Again, that's got a dynamic there which 0:08:30.880 --> 0:08:32.600 you know we'll be watching very closely as well. 0:08:32.720 --> 0:08:35.280 Okay, one of your colleagues at the CBI, after the 0:08:35.320 --> 0:08:38.000 third quarter GDP data out of the UK, which showed 0:08:38.840 --> 0:08:44.400 growth stalling, basically talked about uncertainty. What blamed uncertainty ahead 0:08:44.400 --> 0:08:47.320 of the budget for that slowdown in an economic growth 0:08:47.360 --> 0:08:52.160 and also talked about downside risks to the outlook have increased. 0:08:53.040 --> 0:08:53.520 What is that? 0:08:53.960 --> 0:08:57.080 Why is that that the downside risks now to growth 0:08:57.120 --> 0:09:00.840 going forwards have actually increased as far as the CBS concerned. 0:09:01.160 --> 0:09:03.040 So I think, like we say, that is very much 0:09:03.200 --> 0:09:08.960 around confidence and particularly around business and consumer sentiments. So 0:09:09.840 --> 0:09:12.320 I think businesses, like we say, are having to pull 0:09:12.360 --> 0:09:14.920 back investment, and that's one because of the cost pressures, 0:09:15.200 --> 0:09:18.120 but also because they can see demand has not quite 0:09:18.160 --> 0:09:20.040 picked up in the economy as we'd like it to 0:09:20.080 --> 0:09:23.720 have done. So we are seeing wage growth strengthen, for example, 0:09:23.800 --> 0:09:27.640 and obviously we've now seen those very high inflation rates 0:09:27.640 --> 0:09:30.560 come down, which is really positive, but consumers aren't quite 0:09:30.559 --> 0:09:32.560 getting out and spending as much as we'd have liked 0:09:32.600 --> 0:09:35.840 to have seen. So we're hoping, obviously for many businesses 0:09:35.840 --> 0:09:38.720 in this pre Christmas period that that will be more positive. 0:09:39.000 --> 0:09:41.880 But at the moment, again that hasn't given business to 0:09:41.920 --> 0:09:44.599 the confidence to invest on the back of that demand. 0:09:44.559 --> 0:09:47.120 Okay, Louise, thank you very much for joining us. Louise Hallum, 0:09:47.120 --> 0:09:50.760 the CBI's chief economist, joining us in studio ahead of 0:09:50.800 --> 0:09:54.120 the start of their annual conference which begins a little 0:09:54.120 --> 0:09:56.600 bit later this morning as well. So very interesting to 0:09:56.600 --> 0:09:59.600 see what comes out of those conversations. Is that survey 0:09:59.679 --> 0:10:01.920 set up it up with showing that nearly half of 0:10:02.000 --> 0:10:04.839 British firms are planning to cut jobs after the tax 0:10:04.920 --> 0:10:06.160 changes in the budget.