Keir Starmer’s business charm offensive has been successful but hard work on Brexit and workers’ rights policy lies ahead
Regaining the confidence of British business has been a priority in Sir Keir Starmer’s mission to rehabilitate Labour.
Businesses of course are a disparate bunch, from sole traders and medium-sized enterprises that make up the majority of Britain’s employers, to multinationals that have a choice of markets in which to invest.
They all matter though, because Sir Keir and chancellor-in-waiting Rachel Reeves are counting on the private sector to deliver the economic growth on which their plan to restore public services relies.
Changing sentiment has been a long road.
Jeremy Corbyn and John McDonnell‘s 2019 election agenda sent a chill down the spines of a community that style themselves as “wealth creators”, but have strong views on how much of that wealth they should hang on to.
A successful charm offensive
Judging by the mood among delegates a week before polling day at the British Chambers of Commerce conference, a charm offensive fought over a thousand working breakfasts has been largely successful.
In public and private, delegates and speakers are not scared of what a Labour government might mean. Many indeed are enthusiastic about the opportunity to turn the page on years of economic uncertainty, upheaval and occasionally hostility from Conservative administrations.
Amanda Blanc, chief executive of the insurance giant Aviva, bemoaned “an air of weariness and cynicism” hanging over the economy, but said stable policy after the election could unlock investment.
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Dame Amanda Blanc, the chief executive of Aviva, gives her thoughts on the election ahead to Sky’s Ian King.
“They seem thoughtful and sober-minded, a safe pair of hands, I think they come across as reasonable and evidence-based,” said Paul van Zyl, founder of The Conduit, a members club for ‘changemakers’ based in west London.
More than good vibes needed
Kick-starting the economy will take more than good vibes, however.
Many businesses have questions that Labour cannot yet answer and will come under pressure to resolve when governing replaces opposition.
Stability is Labour’s central pitch, delivered by the party’s Jonathan Reynolds, who may be just eight days from throwing off his “shadow” and becoming business secretary for real.
He had familiar messages about how growth would be delivered, from planning reform and skills to investment in the energy transition.
A plan that’s not working – Brexit
More interesting was what he had to say about Brexit, a dog that has not barked in this campaign largely because the main parties have kept it muzzled.
The BCC wants the new government to “stop walking on eggshells” and call out the shortcomings of the existing deal with the EU.
“The current plan isn’t working for our members,” says Shevaun Havilland, its chief executive.
The big business groups all lobbied to remain in 2016, but companies of all sizes have felt the impact of barriers imposed on commerce with the UK’s largest single trading partner.
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Speaking the morning after Sir Keir described the current EU deal as “botched” in his BBC debate with Rishi Sunak, Mr Reynolds said Labour would seek closer alignment on food safety standards and cut red tape for touring musicians.
But he ruled out anything more ambitious, including allowing “youth mobility”, effectively freedom of movement in the UK-EU for younger people.
“Labour will not be seeking to rejoin the single market or the customs union, or to reopen the wounds of the past, because that would not give us the stability which we know is essential,” he said.
That will disappoint but not surprise many who believe the EU offers the most direct route to increasing growth.
Workers rights
There is uncertainty too about what Labour’s plans to improve workers’ rights will mean in practice.
Deputy leader Angela Rayner is leading “a new deal for working people“, including a guarantee of full employment rights, including sick pay and parental leave, from day one of starting a job rather than after the current two years.
Business bristled at that and the plans have been diluted to a starting point for consultation, but Mr Reynolds was challenged over the potential for increased costs.
“It has the potential to land UK employers with significant costs and risk in a world where we face competition from companies that have the choice to employ people here or internationally,” said Sean Ramsden, chief executive of food wholesale Ramsden International.
Mr Reynolds insisted that the changes, central to relations with the trade unions, would hold back recruitment.
They are a reminder though that, if the polls are right, the hard work is about to begin.
The UK’s benchmark stock index has reached another record high.
The FTSE 100 index of most valuable companies on the London Stock Exchange closed at 8,505.69, breaking the record set last May.
It had already broken its intraday high at 8532.58 on Friday afternoon, meaning it reached a high not seen before during trading hours.
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The weakened pound has boosted many of the 100 companies forming the top-flight index.
Why is this happening?
Most are not based in the UK, so a less valuable pound means their sterling-priced shares are cheaper to buy for people using other currencies, typically US dollars.
This makes the shares better value, prompting more to be bought. This greater demand has brought up the prices and the FTSE 100.
The pound has been hovering below $1.22 for much of Friday. It’s steadily fallen from being worth $1.34 in late September.
Also spurring the new record are market expectations for more interest rate cuts in 2025, something which would make borrowing cheaper and likely kickstart spending.
What is the FTSE 100?
The index is made up of many mining and international oil and gas companies, as well as household name UK banks and supermarkets.
Familiar to a UK audience are lenders such as Barclays, Natwest, HSBC and Lloyds and supermarket chains Tesco, Marks & Spencer and Sainsbury’s.
Other well-known names include Rolls-Royce, Unilever, easyJet, BT Group and Next.
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FTSE stands for Financial Times Stock Exchange.
If a company’s share price drops significantly it can slip outside of the FTSE 100 and into the larger and more UK-based FTSE 250 index.
The inverse works for the FTSE 250 companies, the 101st to 250th most valuable firms on the London Stock Exchange. If their share price rises significantly they could move into the FTSE 100.
A good close for markets
It’s a good end of the week for markets, entirely reversing the rise in borrowing costs that plagued Chancellor Rachel Reeves for the past ten days.
Fears of long-lasting high borrowing costs drove speculation she would have to cut spending to meet self-imposed fiscal rules to balance the budget and bring down debt by 2030.
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They Treasury tries to calm market nerves late last week
Long-term government borrowing had reached a high not seen since 1998 while the benchmark 10-year cost of government borrowing, as measured by 10-year gilt yields, was at levels last seen around the 2008 financial crisis.
The gilt yield is effectively the interest rate investors demand to lend money to the UK government.
Only the pound has yet to recover the losses incurred during the market turbulence. Without that dropped price, however, the FTSE 100 record may not have happened.
Also acting to reduce sterling value is the chance of more interest rates. Currencies tend to weaken when interest rates are cut.
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