The director-general of the CBI has warned the UK cannot look to tackle the issues that face the country’s economy individually but added that it is clear that we don’t know how to do it.
In his opening speech at the CBI Annual Conference 2022 in Birmingham Tony Danker (above) said: “We come together, once more in extraordinary times. Britain is in the middle of stagflation – hit with rocketing inflation and negative growth – for the first time many can remember. We know how to fight inflation. We know how to fight recession. But we don’t really know how to fight them together.
“The predictable reaction is to choose which ‘evil’ is worst. But that just leads to different kinds of problem. Ignore inflation to get growth going and we’ve seen what happens. Immediate trauma. Ignore growth to get inflation down? Prolonged pain. I reject the idea that you have to choose. I say you daren’t choose.
“Aggressively getting inflation down is the right thing to do, especially after the market response to the mini budget. Market stability is a precondition to growth. And I pay tribute to the Prime Minister and Chancellor for taking the tough choices needed to achieve that.
“But what about growth? The painful reality about growth is that it can’t be stimulated overnight. That’s what the mini budget got wrong. Across the board tax cuts. Immediate demand stimulus. Relying on the old British strength − consumption − at the expense of the perennial British weakness − investment − has given growth a bad name.”
He added: “But growth is good. Growth is a precondition to a stable society. Without growth the NHS gets worse not better. People’s lives get worse not better. And we lack the resources we need to transform ourselves to a zero-carbon world.
“Yet Britain’s had 15 years of low growth and flatlining productivity. We can’t afford a repeat.”
Danker added the government needed to lessen the rules on immigration to allow British businesses to access foreign workers.
“People are arguing against immigration but it’s the only thing that’s increased the potential growth of our economy since March,” he explained. “Remember that GDP is a simple multiplier of two things – people and their productivity. And it’s time to be honest: we don’t have the people we need nor do we have the productivity.”
He added the government had to become the “great unlocker of private sector investment”.
“Government must ‘change economic rules’ to overcome political barriers. You decide what we regulate and what we don’t. You decide the skills we import or don’t. You decide where we build or where we don’t. You decide who we trade with and who we don’t. Today those rules don’t work for growth. You relied on fiscal firepower to avoid those tough choices. They can’t be avoided any longer.
“…Our politicians make anti-growth choices every day in pursuit of other political goals. I respect that. But when we confront stagflation and its massive impact on the cost of living, it’s time to kick the tyres on those choices.”
Danker added there are four barriers to growth today borne of political choices.
“First is immigration. Let’s be honest with people. Our labour shortages are vast. First, we have lost hundreds of thousands of people to economic inactivity post Covid. And anyone who thinks they’ll all be back any day now – with the NHS under the pressure it is – is kidding themselves. Secondly, we don’t have enough Brits to go round for the vacancies that exist, and there’s a skills mismatch in any case. And third, believing automation can step in to do the job in most cases is unrealistic.
“So, let’s be practical. Let’s have economic migration in areas where we aren’t going to get the people and skills at home anytime soon. In return, let’s make those visas fixed term.”
Danker continued: “Second is regulation. I know that some Conservative politicians today feel that this issue is the fault of Europe. But the biggest regulatory barriers facing businesses today are based on British laws, created by a British parliament, and administered by British regulators. And the regulatory regime today is gold plated and bureaucratic. It is not outcomes based – it’s rules based. It’s not proportionate – it winds us all up in an overzealous process of enforcement. And too many regulators still think that growth and investment is someone else’s responsibility.
“Third is planning. The UK planning system should be a key economic enabler – helping us to get the essential infrastructure and major projects required. And yet in Britain today, planning is broken – slow, fragmented, rife with local politics. That has to change.
“Then, finally, we have trade. Right now, our trade as a percentage of GDP is the lowest in the G7. Boris Johnson achieved a deal with the EU that allows us to continue to trade tariff- and quota-free with our biggest trading partner. There’s some good stuff in there. Currently locked up.
“But still, we argue over the Northern Ireland Protocol. Still, we argue over sovereignty. Get round the table; do the deal; unlock the TCA. I say to Brexiteers, the best guarantor of Brexit is an economy that grows. Its biggest risk is one that doesn’t.”