Business leaders have given a big thumbs down to the new Labour government. Confidence has fallen from a three-year high in July of +7, to a low of –12 last month, according to a new survey. Bosses fear tax hikes in the autumn Budget will hammer profits, while new Labour legislation will discourage them from hiring staff.
Labour claims public finances are in their worst state since the Second World War and they’re going to have to raise taxes to fill the supposed £22billion black hole left by the Tories.
With a scenario like that, why would any entrepreneur invest in Britain? And Keir Starmer’s claim that it’s going to get worse before it gets better isn’t exactly inspiring confidence, either.
A recent report by the Institute of Directors, representing 20,000 business leaders nationwide, reflects that collapse in confidence thanks to a “news-flow in recent weeks on employment rights and autumn tax rises”, according to its chief economist, Anna Leach.
Faced with legislation to give workers greater rights to flexible working and to strengthen trade union power, many businesses are holding back plans to take on new staff. Proposals to increase employers’ contributions to national insurance as well as hikes in capital gains taxes are also hobbling firms.
All of which is acting as a drag on growth, just when the Government says the economy needs to expand to fund public sector pay rises.
As a result, the IoD’s investment index this month has fallen from +24 in July to –10 in August. Clearly, the honeymoon period is over, with Labour revealing its socialist tax-and-spend, trade-union-backing true self.
Business needs certainty and calm to invest in the future, but Labour’s caving-in to pay demands looks set to unleash yet more industrial unrest, as binmen and council workers threaten an autumn of discontent in a bid to secure the kind of inflation-busting settlements – not linked to improved productivity – handed to train drivers and junior doctors.
Reckless expenditure is only going to encourage further strikes and fuel inflation. Add to that Labour’s doubling-down on net zero, pushing up energy prices, and the UK is not looking like a good investment.
Offshore Energies UK has said Labour’s plans to increase windfall taxes on North Sea oil and gas profits, with tax breaks scrapped, will reduce investment in the sector from £14billion to £2.3billion over the next five years, putting 35,000 jobs at risk. Norwegian state-owned giant Equinor has already said it will stop investment in the North Sea if UK taxes go even higher. By refusing to contest a Greenpeace lawsuit against gas and oil projects, Ed Miliband is hurtling us towards a decarbonised future in which we may well endure energy blackouts across the country thanks to intermittent renewable power.
The problem at the heart of Labour is that it is constructing a two-tier economy, in which private sector business taxes are being escalated to pay for public sector pay increases. This parasitical model can only lead to the decline of the host – meaning growth will collapse.
Wealth-makers are already leaving the country in anticipation of Labour’s anti-business regime. Advertising boss Sir Martin Sorrell has seen a number of his colleagues leaving the country, saying it’s “inevitable given coming tax hikes”, while Pimlico Plumbers founder Charlie Mullins has vowed to leave Britain for Spain, blaming the “socialist money-grab”.
Tax expert Tom Adcock says the exodus is under way as his “clients are rushing through transactions, such as third-party sales to liquidations of businesses, to avoid the spectre of potential tax rises”.
The loss of expertise and investment capital will do little to generate growth.
The pity is that the economic outlook for the UK, in contrast to its public finances, is actually looking good, with recent data showing Britain is growing faster than its leading competitors, while inflation is falling. With Brexit freedoms allowing greater opportunities to trade around the world, the future should be bright for Britain.
But Labour is endangering all of this.
It’s little wonder the PM recently reputedly felt unsettled enough by the portrait of Margaret Thatcher in No 10 to have it moved, because his plans reject her businessfriendly reforms, which generated jobs and wealth.
Just as we emerge from postpandemic gloom, it seems we have the wrong government with the wrong ideology at the wrong time – and it looks like business leaders agree.
