There are concerns that hopes of growth and solving Britain’s worklessness crisis will be impossible to achieve if businesses pause hiring and investments for the foreseeable future. As the boss of one UK retail giant told us last week, “all the talk about a growth strategy has dissipated as it has gradually sunk in that there is nothing much there”. After a very successful courtship between politicians and chief executives before the election “for many the line has gone dead” since, they said. “The bright hopes of last summer have turned to perplexity, then disappointment and now dismay.”
Disillusion has set in. More than 80 chief executives wrote to Ms Reeves last week warning that they faced £7bn in increased costs, making job losses and price rises inevitable, while the chief executive of John Lewis has accused the Chancellor of launching a “two-handed” tax grab on retailers.
The hopes really had been high earlier this year, when Labour seemed like the new party for business. At the start of this year, Reeves made it to the top table at a dinner for world leaders in Davos for the first time. Everyone in the room would have wanted to meet the person they expected to become Britain’s first female chancellor. Sat between Canada’s finance minister and Belgium’s prime minister, she was in such demand that by the time dessert arrived she had to abandon half her chocolate pumpkin cake.
But being in power has proved to be much less fun, and friends are turning. At the CBI conference, attendees will hear Rain Newton-Smith, the CBI’s chief executive, attack the Budget in a damning speech, where she will argue that businesses have been “caught off guard” and are now in “damage control” mode.
“Tax rises like this must never again simply be done to business,” she will add. She will also take a pot-shot at Labour, which until recently had convinced businesses this was the party for them, by arguing that profits are not a “dirty word”.
It’s a tone she can’t avoid. The scandal-hit CBI wants to prove that it’s still Britain’s premier corporate lobbying group and a voice for business, so this is its chance to show it still has worth. Businesses feel the “line has gone dead” with politicians just as they prepare to be hammered by a £25bn tax raid on national insurance contributions paid on workers’ earnings.
Businesses that rely on low-wage, part-time staff are particularly affected as the salary threshold falls to £5,000. Six in 10 companies want to slash their hiring plans as a result of this, a CBI poll has found.