Speaker 1: The UK's most influential business library group, the CBI says
Speaker 1: nearly half of British businesses are planning to cut jobs
Speaker 1: after last month's budgets. We saw the payroll taxes paid
Speaker 1: by employers increase. The Confederation of British Industry's annual conference
Speaker 1: begins today and we've got the CBI's chief economist Louise
Speaker 1: Hallam with us in studio. Morning to you, Louise, So
Speaker 1: you say that firms are in damage control well after
Speaker 1: the budget. What does that look like?
Speaker 2: So?
Speaker 3: I think, as you say, we ran a survey of
Speaker 3: businesses after the budget and half of those came back
Speaker 3: and told us that they will have to think about
Speaker 3: perhaps restructuring and cutting jobs within their workforce. Sixty percent
Speaker 3: said that those who were planning to high will now
Speaker 3: have to cut back on those decisions, and fifty percent
Speaker 3: said that they need to relook at capital investment plans
Speaker 3: as well. So I think whilst in general we were
Speaker 3: hoping that the economy would start to pick up a
Speaker 3: bit more this year, I think the budget has really
Speaker 3: give businesses pause for thought.
Speaker 2: So the CBI was taken by surprise by this.
Speaker 3: Well, I think we all knew that there were going
Speaker 3: to be measures around national insurance in the budget, but
Speaker 3: I think that we have been quite surprised by the
Speaker 3: size of those changes and actually by the way that
Speaker 3: they have been done as well. So that reduction in
Speaker 3: the threshold when you start paying national insurance contributions was
Speaker 3: very large and also really impacts those businesses who do
Speaker 3: have very large workforces, and particularly for those who hire
Speaker 3: people at the lower end of the earnings distribution, which
Speaker 3: obviously combined with the national living wage increases as well,
Speaker 3: means you've got a lot of factors combining to make
Speaker 3: sure it is actually going to be harder to invest
Speaker 3: to hire people in the UK.
Speaker 1: That your organization would have had a lot of contact
Speaker 1: with Rachel Reeves and the Treasury running up to the
Speaker 1: budget as well. Essentially, I mean, the Labour put so
Speaker 1: much effort into paying themselves as the Party of Business
Speaker 1: before the election. Was it that they just didn't tell
Speaker 1: you what they were going to do or that they've
Speaker 1: changed their position.
Speaker 2: On the matter.
Speaker 3: So I mean, I think when we obviously do have
Speaker 3: a lot of engagement with the Treasury, as you said,
Speaker 3: but obviously there are certain sensitivity around tax changers, so
Speaker 3: like I say, I think we knew, as it was
Speaker 3: widely trilled there we'd be these measures around national insurance.
Speaker 3: So you know, we were very much telling them around
Speaker 3: the circumstances for business at the moment, and particularly where actually,
Speaker 3: you know, many businesses have been hit by a lot
Speaker 3: of costs over the last few years with things like COVID,
Speaker 3: the energy crisis, etc. The ability to bear some of
Speaker 3: these additional costs is lower than it might otherwise have been.
Speaker 3: And the other thing that we were doing is talking
Speaker 3: to them about you know, if there are measures like
Speaker 3: this you might need to take, you need to think
Speaker 3: about offsetting measures as well. So for example, they've talked
Speaker 3: about reforming the apprenticeship levy, but we're not really seeing
Speaker 3: reform on that as quickly as we'd like to see.
Speaker 3: We know that inactivity is a big problem for businesses,
Speaker 3: but again there was little in the budget to help
Speaker 3: businesses to support those in poor health within their workforces.
Speaker 3: So I think that there is a lot of work
Speaker 3: that the Chancellor and the Treasury could have done to
Speaker 3: just ease some of this pain for businesses. Unfortunately, you know,
Speaker 3: we've not seen as much as that as we'd like
Speaker 3: to have seen.
Speaker 2: It sounds like the cbr's view is that the Labor
Speaker 2: government made the wrong decisions in the budget, certainly the
Speaker 2: wrong decisions for business. You've placed a lot of importance
Speaker 2: on the government's promised industrial strategy to deliver higher sustainable growth,
Speaker 2: but in the budget that doesn't seem to have delivered
Speaker 2: for business.
Speaker 3: So I think there's no way to escape that for us.
Speaker 3: We see the budget as being very difficult for business,
Speaker 3: but I think you're right, and what we are trying
Speaker 3: to do in those conversations with the government is to
Speaker 3: look at all the measures that they are proposing to
Speaker 3: do and make sure that that collectively does add up
Speaker 3: to a stronger plan for growth. So the industrial strategy,
Speaker 3: as you mentioned, will be incredibly important for that.
Speaker 2: What is going to be in the industrial strategy. Everybody
Speaker 2: understands that there has not been enough economic growth, but
Speaker 2: I have not heard anybody come up with a cogent
Speaker 2: solution of betting on particular sectors, on doing one, two
Speaker 2: or three things that would actually deliver sustainable economic growth
Speaker 2: to the UK. There were some hints in Mansion House
Speaker 2: about rolling back on a bit of regulation. What is
Speaker 2: it that's meant to be in the industrial strategy that
Speaker 2: will deliver growth for Britain.
Speaker 3: So it's obviously out for consultation at the moment and
Speaker 3: will be launched in the spring. But what we're feeding
Speaker 3: into it is, as well as those kind of eight
Speaker 3: sectors as you've alluded to that they've highlighted, they'll focus
Speaker 3: on we do need to make sure that we're not
Speaker 3: forgetting the kind of everyday economy and that so it's
Speaker 3: these points that we've been talking about and making sure
Speaker 3: that you actually have a competitive tax regime in the UK.
Speaker 3: Regulation across the board is thinking about how can we
Speaker 3: be more outcomes based to that, how can we kind
Speaker 3: of cut and make a regulation more efficient in places
Speaker 3: They've obviously made some really important moves towards planning reform,
Speaker 3: but you know that is an area where we still
Speaker 3: need to see significant progress and is a real barrier
Speaker 3: to businesses when they are thinking about expansion, and particularly
Speaker 3: actually when you're thinking about green connectivity, for example, on
Speaker 3: firms trying to move forward on their net zero journey.
Speaker 1: The pain that's evidenced in your survey that businesses are
Speaker 1: feeling today is that something that you feel that you
Speaker 1: have any optimism could be eased as growth returns to
Speaker 1: the economy, does the economic picture look like it might
Speaker 1: actually change that sentiment in the kind of short to
Speaker 1: medium term.
Speaker 3: So I think that what we need to see, as
Speaker 3: I said, is we need to see some of those
Speaker 3: kind of measures to help businesses, particularly if they are
Speaker 3: thinking about perhaps increasing the productivity in their workforce. So
Speaker 3: I talked about skills and the apprenticeship levy, but actually
Speaker 3: things like tech adoption and taking on AI you know,
Speaker 3: will be incredibly important for businesses to try and absorb
Speaker 3: some of these costs. Businesses, you know, are very spectrums
Speaker 3: along their journey. There's lots of businesses that I speak
Speaker 3: to that are leading the charge on that, but actually
Speaker 3: for many, you know, they don't perhaps know where to start.
Speaker 3: And so actually think, you where can the government come
Speaker 3: in with kind of best practice advice and try and
Speaker 3: help businesses at all ends, but particularly in that kind
Speaker 3: of more medium and smaller end of the economy as well.
Speaker 2: In terms of the certainty picture, one of the big
Speaker 2: factors was the decline in business and consumer sentiment, which
Speaker 2: was really surprising. After the election, there had been a
Speaker 2: lot of hope that a new government would bring more
Speaker 2: long term stability just by the fact of being elected
Speaker 2: for five years and that that would therefore you provide
Speaker 2: a bedrock for businesses and consumers. But in fact, sentiment
Speaker 2: surveys plunged after the election. Was that a shock to you?
Speaker 2: Do businesses feel like they have certainty now?
Speaker 3: So I think that we definitely did see that in
Speaker 3: a lot of our conversations, particularly overthrow the summer going
Speaker 3: in the autumn, and we're now seeing that reflected in
Speaker 3: some of the ecademic data that we're having coming through.
Speaker 3: I think that, you know, again, when I spook to
Speaker 3: the Chance ahead of the budget, she was talking a
Speaker 3: lot about let's get the bad news out, let's draw
Speaker 3: the line in the sand, and then move on for growth.
Speaker 3: I mean, I think if the budget, you know, is
Speaker 3: all of the bad news, then hopefully we can be
Speaker 3: more optimistic going forward. And like I said, I think
Speaker 3: there's lots of elements that we do want to work
Speaker 3: really constructively with government on. But I think that obviously,
Speaker 3: you know, the measures in the budget were so large
Speaker 3: that you know, they have, as we said, really impacted
Speaker 3: that business confidence and so I think that that does
Speaker 3: make that job of increasing growth in the UK economy
Speaker 3: that much harder.
Speaker 1: How worried are you remembers about what policies could be
Speaker 1: implemented by the Trump administration in the US, potentially tariffs.
Speaker 3: For example, So I think tariffs is obviously a big
Speaker 3: area for concern at the moment. So yeah, we're talking
Speaker 3: to members at the moment to understand some of that sentiment.
Speaker 3: I think obviously it's too early to tell exactly how
Speaker 3: large some of those tariffs could be and across witch sectors,
Speaker 3: and obviously there is a bit of a question as
Speaker 3: to how much the UK might be affected versus particularly
Speaker 3: China and the US. So that's something we're definitely keeping
Speaker 3: a watch on and is a concern for many members.
Speaker 3: I think. One of the other areas with the Trump
Speaker 3: administration is obviously, you know, they might cut back on
Speaker 3: some of their defense spending, which might put more pressure
Speaker 3: on the UK and the EU. Again talking about some
Speaker 3: of the factors that the government is going to have
Speaker 3: to deal with over the next couple of months in
Speaker 3: the spending review. Again, that's got a dynamic there which
Speaker 3: you know we'll be watching very closely as well.
Speaker 2: Okay, one of your colleagues at the CBI, after the
Speaker 2: third quarter GDP data out of the UK, which showed
Speaker 2: growth stalling, basically talked about uncertainty. What blamed uncertainty ahead
Speaker 2: of the budget for that slowdown in an economic growth
Speaker 2: and also talked about downside risks to the outlook have increased.
Speaker 1: What is that?
Speaker 2: Why is that that the downside risks now to growth
Speaker 2: going forwards have actually increased as far as the CBS concerned.
Speaker 3: So I think, like we say, that is very much
Speaker 3: around confidence and particularly around business and consumer sentiments. So
Speaker 3: I think businesses, like we say, are having to pull
Speaker 3: back investment, and that's one because of the cost pressures,
Speaker 3: but also because they can see demand has not quite
Speaker 3: picked up in the economy as we'd like it to
Speaker 3: have done. So we are seeing wage growth strengthen, for example,
Speaker 3: and obviously we've now seen those very high inflation rates
Speaker 3: come down, which is really positive, but consumers aren't quite
Speaker 3: getting out and spending as much as we'd have liked
Speaker 3: to have seen. So we're hoping, obviously for many businesses
Speaker 3: in this pre Christmas period that that will be more positive.
Speaker 3: But at the moment, again that hasn't given business to
Speaker 3: the confidence to invest on the back of that demand.
Speaker 1: Okay, Louise, thank you very much for joining us. Louise Hallum,
Speaker 1: the CBI's chief economist, joining us in studio ahead of
Speaker 1: the start of their annual conference which begins a little
Speaker 1: bit later this morning as well. So very interesting to
Speaker 1: see what comes out of those conversations. Is that survey
Speaker 1: set up it up with showing that nearly half of
Speaker 1: British firms are planning to cut jobs after the tax
Speaker 1: changes in the budget.