Feature: What the business world is thinking

Voices from British business give their view on the coalition's economic policies
Voices from British business give their view on the coalition's economic policies

David Cameron and Ed Miliband's struggle for the hearts of business figures at the CBI conference in London proved something of a one-sided affair.

By Alex Stevenson

The business world has traditionally been happier giving the thumbs-up to the Conservatives rather than Labour. As delegates looked back on a busy day in central London, could this survive the coalition's radical plans to tackle the deficit by cutting public spending so quickly?

"It is a gamble, there is a risk there," says Ali Parsa of Circle Health, which operates hospitals across the UK. He echoes Ed Miliband's warning that the coalition's approach is fraught with risk. But he doesn't agree with it.


"The truth of the matter is if any business runs itself that out of £4 it has spent £1 it does not have, then it will run into ground quickly. Britain needs to deal with that. It was a gamble Britain had to take."

Figures within the coalition take great comfort from the example of Canada in the 1990s, which cut public spending decisively to eliminate a large structural deficit in just a few years.

Ian Cohen of risk insurance firm Jardine Lloyd Thompsonsays he was "struck" by former Canadian finance minister Paul Martin's advice backing an uncompromising approach.

"The debate can come afterwards once you've decided the detail of the plans, but if addressing the deficit is non-negotiable and if party 'a' tries to negotiate in favour of their department, party 'b' has to pick up the slack elsewhere," he says.

"Clearing the deficit is a non-negotiable item. How we go about it is the piece that's negotiable, but only in as much as the level at which you act."

This minor detail of that negotiable area is not downplayed by those from the public sector, who inevitably have bigger concerns about where the cuts will fall. Jagtar Singh, a non-executive director with Luton and Dunstable NHS Trust, warns of "serious cuts to NHS expenditure" despite the health service being ringfenced. He says the spending review had produced "the most unhelpful equality impact assessment ever".

And he adds: "Public sector cuts are going to have without a doubt an impact upon inequalities in our communities, they're going to have an impact on health and an impact on the public services of less fire stations, less police stations, less hospitals, less theatre space."

Business figures appear broadly supportive of the coalition's deficit reduction plan. They think public spending plans were unsustainable and believe action needs to be taken.

"I think the problem we had was we went through a period of madness where we threw money which we did not have at problems which we certainly did have," Mr Parsa adds.

"Hopefully we won't let this good crisis go to waste - we'll learn from it and rebalance value in the economy as a whole."

At the summit of the CBI the mood is one of looking ahead beyond the spending review.

"In a sense it's all about confidence now," outgoing director-general Richard Lambert says.

"There's nothing the government can or should be doing in the way of any kind of more stimulus, whatever, so it's about setting in train feelings of confidence about the way the economy's going forward. And doing whatever can be done to remove any barriers to job creation."

On the strength of these comments, at least, British businesses are largely supportive of the coalition government's spending cuts. Does this translate to popularity for David Cameron? Apparently, yes.

Cameron v Miliband

There are few occasions when the same audience hears from the two party leaders on the same topic. The annual CBI conference is one of these rare treats; less than an hour after David Cameron had left the stage Ed Miliband was striding on to try his luck.

The assembled critics have a clear favourite. Even those like Mr Singh opposed to Mr Cameron's plans concede he is "able" and "very relaxed".

"I think he's firmly along with the rest of the coalition put himself in a position of accountability," Paul Smith of recruitment firm Harvey Nash says. Peter Wall of W G Eaton is swayed by the prime minister - "as long as they do what he said". Mr Cohen of JLT points out: "He has the benefit of being in government, and being able to say what he will do, rather than the others who say what they might do. I thought he was very good."

The verdict on Miliband is less appealing. Even at the superficial level he was judged worse than Cameron.

"I think the energy of the speech was perhaps where it was lacking," Stuart Soter of the CBI comments. "It was more the method of the delivery rather than the content."

That is a running theme. Mr Singh thinks Miliband was a "little nervous, but certainly competent". He attributes this to a lack of experience, but others believe the problem is rather more serious.

"I thought his speech was weak," Mr Smith says. "It lacked any policy or any real facts that made me feel that the Labour party's going anywhere with their policies in the future... overall I actually think he's a second option, not a first option, for the Labour party."

Mr Wall doubts the new Labour leader's credibility. "He's one further removed from reality on it. He talks about his enterprise but does he really know what he's talking about? I'm not sure. What are his plans?"

And Mr Cohen goes even further, accusing Miliband of trying to "bend his message" for the CBI. "That was unfortunate. He is a bright guy, but his message was kind of lost in comparison."

Mr Lambert, who has been the premier spokesman for British business throughout the last four years, is more diplomatic.

"He's five weeks in the job, he doesn't have to produce a policy manifesto," he says.

"My take was more positive. He said that New Labour under Blair built a new relationship between Labour and business and he was determined to maintain that. When he started down that pathway I thought 'I wonder where he's going'. But when he got to the end he said we're going to maintain those close relationships. I was encouraged by that."

And here's another plus: "I was interested that nobody in the audience asked him about trade unions, so they can't be that concerned."

Despite Mr Lambert's praise it's clear which politician has won the heart of the CBI. But as Miliband said in his speech, his desire to "build with you a relationship" is only just beginning. There is a long time before the next general election.

Giants of the small business world

A more pressing concern for delegates at the CBI conference, it is clear, is the fate of small and medium sized enterprises. These have suffered the most from the lack of finance available from banks, as they repeatedly reminded the conference.

Mr Wall, who after heading a large professional services division is now involved in two small family businesses, reflects these concerns.

"If they're expecting the private sector to create hundreds of thousands of new jobs they can't do it without some kind of help and encouragement," he explains.

"You're not going to create all these new jobs just by one-man bands setting up as hairdressers or window-cleaners or consultants in their front lounge. You've got to have serious businesses with innovative products and manufactured items. These things don't come easily - you need some help, you can't get money up front from venture capitalists. They're more interested when you've actually started trading."

Ministers' prospects for the economic recovery look much bleaker if they fail to address the problem, he argues. "They won't do it unless they get the banks [to be] more user friendly for the SME sector and bring back some of the business support, not dismantle it. It just won't happen."

Mr Soter, whose job at the CBI involves promoting the interests of larger firms, rejects the "sterile" distinction between SMEs and the biggest companies.

"It concerns me that yet again that controversial dialogue [is taking place] in this sort of venue," he worries.

"There is an argument taking place at the moment that... the smaller SMEs have lacked attention. I'm not sure that is the case, but that is the perception.

"The perception is smaller businesses have not been supported as they should be, rather getting into bashing the big businesses. Let's address what is being done and filtering down to all businesses."

There is, unsurprisingly, a reluctance to acknowledge the disparity at the top of the CBI. Mr Lambert acknowledges that it's easier for big companies because they can raise money on the capital markets, so they're not as dependent on banks and small- and medium-sized companies. Will he admit that there are concerns?

"They're not as intense as they were a year ago, but they're still there."

Miliband has 12 months to produce a coherent alternative approach to the deficit and restore trust in Labour among Britain's businesses. Cameron's task may seem easier - but, with worries not going away, the government must work hard to keep hold of the support it currently enjoys.

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