UK economy cannot be put on hold during leadership election

As the elections for the new leader of the UK’s Conservative party began, Britain’s leading business group has sent each candidate a letter spelling out its plans to restore the country’s economy.

CBI director General Tony Danker (above) issued the open letter to the candidates one of which will become the UK prime minister on 5 September.

In the letter Danker said: “As candidates to be the next prime minister, we urge you to develop serious, credible and bold plans for growth. We all know the serious challenges that the country faces today – its people and its business community: eye-watering inflation putting households and enterprises under real pressure; firms unable to find the skills and talent they need in a super-tight labour market; and global supply chains remaining disrupted, not least by the tragic events in Ukraine.

“We are currently set for just 1% growth in 2023 and to continue to languish at the bottom of the G7 table on business investment. It won’t take much to tip us into a recession and were that to pass it would prolong the cost-of-living crisis.”

He added: “But the UK is also caught in a longer-term trap of low growth. Higher productivity is the only sustainable way to achieve higher standards of living and tackle the fiscal challenges of an aging population and decarbonisation while lower the UK’s high tax burden.”

The CBI added sustainable economic growth “must be at the heart of your manifestos”.

The letter said the candidates had to have a plan for growth.

“The next Prime Minister must have a plan for growth that dominates policymaking across every government department,” Danker said. “This is not exclusively a matter for the next chancellor – the policies of virtually every department impact growth and only a broad plan, managed by a strong prime minister can be effective.”

To support candidate’s programmes, the CBI said it is releasing its own plan to “build confidence, attract investment and get the UK growing again”.

Titled How Britain grows again: An economic plan for the UK, It includes what the organisation said were practical actions for quick wins that will make a real difference and help us on the way to £700 billion worth of prizes for UK firms in the decade ahead.

“Crucially, we set out how these can be achieved, with Government and business working in partnership. There are prizes on offer through decarbonisation, innovation, trade, thriving regions, labour and health. And those prizes can be realised if Government pulls on four key growth levers: smart taxation to unlock investment; building a workforce for the future; delivering catalytic public investment and making markets to outcompete the world.”

Danker said tax changes must trigger business investment, not fuel inflation.

“One of these levers – tax – is attracting more attention than the others and we would urge candidates to show how growth policy is about more than this,” he said.

“As for tax, our nation’s longstanding poor performance on business investment must be tackled, especially with the Super Deduction ending next April.

“This should be the overriding objective of tax policy now. Growth that relies on only government or household consumption is doomed to fail, especially at a time of rising inflation and high debt. Investment targeted business tax measures avoid significant inflation risk as they seek to materialise into economic activity over the year ahead and beyond, rather than right now in the midst of inflation.

“They ensure that any downturn we face is short and shallow and that inflation-driven pay rises are replaced by sustainable, productivity-driven ones”.

Danker said the leadership election cannot deflect the UK government from making every effort to right the economy.

“We cannot afford to get stuck in limbo with few decisions being taken and little action seen,” Danker said. “Business confidence is falling, exacerbated by a sense of drift and the politicisation of economic policy. The summer therefore needs realistic government actions that bolster confidence.

“The wheels of government must keep turning – get a full government team back in place to move essential legislation forward before recess; announce a successor to the Recovery Loan Scheme; cut approval times for new offshore wind farms from four years to one; clarify status of key projects, such as the planned investment commitments to the Ox-Cam Arc; and get going on a new Shortage Occupations List.”

He concluded: “We, as ever, believe the UK has great strengths which we can build on together. We can boost confidence. We can reignite a UK growth story and unlock investment. We can seize the moment.”