Sweet or sour? The potential for the Conservatives’ business agenda

Photograph: Dan Kitwood/Getty Images

Photograph: Dan Kitwood/Getty Images

This word ‘potential’ succinctly sums up both the likely good and bad for business from the new Conservative government. On the one hand, the government’s bills for the year (in last week’s Queen’s Speech) show real potential for a competitive agenda that boosts business. But on the other hand, the government’s agenda around Europe has the potential to deliver large-scale damage and uncertainty to business. So which side of potential is it going to be, the good or the bad; sweet or sour?

As I have written before (here) in my assessment of Labour, the pro-business agenda was handed to the Conservatives in the lead up to the election. But it is not a mantle that they took for granted delivering a number of manifesto pledges, now becoming tangible bills which will undoubtedly please business.

The Full Employment and Welfare Benefits Bill has enshrined in it the progressive goal of achieving full employment. Its aim is for two million more jobs and three million new apprenticeships to be created with ministers required to report annually on this progress. A chief weapon here, especially in granting young people opportunities will be apprenticeships. What will make these apprenticeships and skills stronger, will be the focus of industry. This will both be in underpinning the training with industry input, e.g., accreditation around Further Education courses by employers, and making sure the skills delivered are what employers need. Here, the government is showing real potential in tackling persistent areas of problems for the UK, such as youth unemployment and skills gained not matching the ones industry needs.

Other areas where this government is showing real potential include the National Insurance Contributions Bill that has stated that there will be no rise in VAT or national insurance before 2020. Alongside this, the Enterprise Bill aims to create a new Small Business Conciliation Service, to help settle disputes between small and large businesses. This will pay particular attention to late payment practices, which have become a real threat to SMEs balance sheets and therefore wider growth.

The government’s aim to improve business rates (ahead of a re-evaluation in 2017) although a tough call, is an area that rightfully requires immediate attention. They have become a competitive drain on businesses which base themselves on the high street (as opposed to the internet) and are arguably the principal challenge facing Britain’s high streets. Radical changes beyond more frequent property valuations and amending the multiplier (the proportion of property value to be paid as business rates) are likely to be needed though to stop this high street plight.

Making the UK the best country for STEM (Science, Technology, Engineering and Maths) via the Education and Adoption Bill supports key areas of growth for UK industry, such as the digital economy. It’s a generalisation, but fair to say that the ‘high value, high skilled’ jobs that we hear politicians speaking about and that the UK needs as a mature economy will come from this STEM area. The related Childcare Bill will also help those trying to get on in business through greater childcare, as called for by the CBI and as I wrote about (here).

Some might be wondering why I have not come to the Enterprise Bill’s 10 billion pounds worth of reduction in regulation for businesses (especially SMEs) yet. It’s seen as an old maxim that reducing regulation is good for business, as regulation adds to burden and cost, while reducing growth. There is definitely scope to see regulation reduced and made smarter to help business grow and reduce burden. The concern comes from descriptions of this regulation reduction, the so called ‘bonfire of regulation’ (not government’s direct words, but of backbench Tory MPs, such as David Davis). Regulation like building or food regulation, helps and protects the consumer, e.g., the traffic light system on food packaging. It also drives business in certain emerging industries such as the green industry, e.g., environmental emissions. Only this week, the growth of this sector was shown with UK environmental taxes at 44.6 billion pounds in 2014, 7.5% of all revenue from taxes and social contributions in this period.  So less bonfire and more targeted reduction to really unleash potential here.

Bonfires aside then, So far so good on the whole for the potential of the Conservatives agenda for business. Things, however, have the potential to take a dramatically negative turn for the worse for business from the Conservatives’ EU Referendum Bill and the damage it can cause. The bill will pave the way for an in/out referendum on Britain’s membership of the EU by 2017 at the latest – with some predicting this may be held as early as autumn 2016.

Even if this referendum is held earlier, the uncertainty to business over the result will undoubtedly cause a stall in investment into the UK, similar to that pre-election. Although the Prime Minister has said he is pro staying in a reformed EU, the gnashing of teeth from Eurosceptics in the Conservatives is only going to get louder. Europe has traditionally been a difficult area for the Conservatives, with Europe once described by William Hague as ‘a ticking bomb’ that could blow up the Conservatives. Already reports are coming out of division in the Cabinet over the UK’s involvement in the European Convention of Human Rights. Controlling the negative background music on Europe up to the vote will be crucial to hold investors’ nerves in check to stop the tap being turned off on investment.

The potential for long term damage from an out vote for the UK economy and business must also be properly assessed and a contingency set in place. International business sees the UK as a bridge into the EU’s single market, the largest in the world. Cross-border trade between EU countries was 2.8 trillion euros in 2013, and trade between the EU and the rest of the world 1.7 trillion euros in 2013.  There will likely be a pull out of companies from the UK therefore, as we have seen mooted by companies such as Airbus. UK domestic business will also be hit with punitive penalties if outside of the market from an out vote. To put this in context, UK goods trade with the EU was 364 billion pounds in 2013 compared to 43 billion with China.

It is right that the British people have their say on Europe. I, like the overwhelming majority of business see huge benefits to staying in the EU and will vote to stay in. But just as the leaked memo being drawn up the Bank of England is looking at the wider financial risks of leaving the EU, such a contingency document should be drawn up specifically for business with a plan for mitigating the negatives for business if the referendum vote is a no.

I cannot remember a government’s agenda where the good and bad potential for business clearly cuts both ways. We need to hear more positive noises from David Cameron’s European counterparts in relation to the Prime Minister’s EU renegotiation efforts. Failure here, I fear, means the potential of what could be a positive agenda for business will turn sour.



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About the Author

About the Author: Crispin Oyen-Williams is the Director and Founder of Business Innovate. .


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