Whoever wins the General Election will need to overcome being seen as ‘anti-business’. Both Labour and the Conservatives have serious work to do.
The Conservative Party has always valued being perceived as the natural party of business and economic competence. While the Labour Party oversaw devaluations in the pound and could not stem the economic problems of the late 1970s, culminating in the Winter of Discontent, the Conservatives deregulated and privatised its way to favour with business and election wins.
Aside from the battering of Black Wednesday which inflicted serious damage to its economic credibility, the Conservatives even managed to win elections despite imposing austerity. Whilst employment may be high and the growth figures respectable, the real damage has been inflicted by Brexit. But Boris Johnson also has still to fully play down his ‘f*** business’ comment. Even his opponents during the leadership election tackled him head-on about it.
For many in business, the increased risks of constantly shifting Brexit deadlines as well as the financial costs associated with preparation of a threatened ‘no deal’, are eroding their faith in the Conservative Party. The vast majority of businesses and business groups do not want us to crash out of the European Union but the politics of needing to face down the European Commission has taken precedence. The politics seems to outweigh the economics.
Just last week, Johnson was recorded telling party activists that retaining free movement and access to the Single Market, delivered by his Brexit deal, is great for Northern Ireland. That left businesses on the mainland scratching their heads as to why they should not enjoy such benefits as well. Johnson dismissed the need for NI to fill in customs forms. Keir Starmer reported in a tweet that “Boris Johnson either doesn’t understand the deal he has negotiated or he isn’t telling the truth. Probably both.”
That leaves many across business unclear about whether Johnson is really on their side and about what the path his government could take. This undermines business confidence.
For Labour, the situation is pretty dire as well. There is no doubt that the party is planning some radical change including a possible four day week, employee ownership and a whole range of nationalisations. They have also been explicit in saying that businesses, as well as better off individuals, will pay more in tax to pay for their spending plans. To suggest that those spending pledges are big by any standards would be an understatement.
John McDonnell may now look more ‘cuddly uncle’ than Marxist revolutionary but there remains a lack of trust in Labour’s leadership especially where it comes to running the economy. But the party is not quite as anti-business as opponents would like to portray them. On the same day as estimates were released about the cost of a proposed four day working week, Microsoft were extolling the increases in productivity of their experiment with a four-day week in Japan.
Fundamentally, investment in infrastructure remains a priority for Labour, as it is for the Conservatives. But Labour has been explicit in saying that private investment is part of that package. Whether that is achievable, is a different matter.
The Conservative Party has only recently rediscovered the need to stand-up for free markets but any idea that their response to Labour’s nationalisation plans will be to solely advocate for the private sector is misplaced. Instead, we are more likely to see government intervention and greater levels of regulation. It will ‘take back control’.
Take transport as an example. Labour is winning the arguments fundamentally because of the perceived poor performance of the private sector. The Conservative answer is not to open the market still further but instead to see what intervention may be required. This can be expected across other sectors where nationalisation is currently being proposed by Labour.
So where does this leave us?
Both parties are desperate to prove their economic credentials, both need to demonstrate that business can trust them. The Conservatives will hammer Labour on their spending plans; Labour will extend the debate to include who can run the NHS.
For businesses, the reality is more Brexit risk and uncertainty. We could ‘leave’ at the end of January but still ‘crash out’ at the end of 2020 under Boris or renegotiate and have a second referendum under Corbyn.
If nationalisations progress under Labour then legislation will need to progress through Parliament, potential compensation agreed and there is no doubt that the Courts will be involved. But even the Conservatives will look to exercise the levers of the state to intervene where voters see failings.
So business can look forward to more risk, regulatory complexity and intervention whatever the outcome of the election.
Stuart Thomson is head of public affairs and Hollie Gallagher is a corporate partner at BDB Pitmans