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This election year, all parties must have the courage to look to the long game on the economy - CBI CEO speaks at LEAD 2024 conference (08 February 2024).

I want to start by thanking the Advertising Association, IPA and ISBA for bringing us all together.

It’s great to be back, opening a conference for one of our brilliant members…

…in the heart of Westminster, in this decisive year for UK and global politics.

I’m sure we’ve all heard how this is the year of democracy – when more than two billion people around the world will be voting in elections.

In the UK alone, there are English council elections, by-elections, London Mayoral elections, the Welsh First Minister selection – and of course, the big general election.

That’s a lot of political debate.

And I want to talk today about something I know will resonate with advertisers – cutting through all that noise.

It’s just one of the reasons the UK’s £37bn advertising industry is so important. As well as being one of our core creative industries, a vital part of our global expertise in services.

I said at the CBI’s Election Countdown in November – standing right here in fact – that the UK is a nation of storytellers. No one better embodies that than the advertising industry.

Because when customers are overwhelmed with choice, advertisers use stories and narratives to distil the important information, cut through the noise – and get the information to the people who need it.

The narrative that matters

Well, among all the political narratives for voters to choose from in 2024, there is a crucial economic narrative we must never lose sight of.

It’s a story we see right across the UK.

The need for growth that is sustainable, not fuelled by pre-election giveaways. That is predicated on a bedrock of stability. That focuses on the UK’s amazing capabilities and sets out a clear, long-term plan to make the most of them. Which we stick to. We can even call it an industrial strategy.

One which creates an economy with skills for the future, with businesses able to invest and innovate, that is competitive on the global stage. So that we can have sustainable growth to help tackle the cost-of-living crisis that is still biting for so many people.

Last year, GDP growth was just 0.6 per cent. And for this year, we’re forecasting growth of just 0.8 per cent. And we are one of the optimistic ones.

That’s the economic narrative we have – and we must do better.

Our members recognise that. Across all sectors, regions and nations, they tell us what matters most to them this election year is driving long-term, sustainable growth.

Business can’t go to the polls – but they do need a voice.

And that’s our job.

To cut through the noise and keep politicians of all parties laser-focused on driving sustainable growth – for the good of all.

Big choices, bold moves

So, what do we need?

Well for growth to be truly sustainable, it must prevent persistent high inflation. Business investment is set to fall five per cent this year, in part because of higher interest rates needed to bring inflation down. As one business leader told me, they don’t want to see tax cuts driven by short-termism which leads to higher interest rates. They want stability so they can invest for the future.

To fund our public services with an ageing population, we must keep large-scale tax cuts off the table.

We must build resilience in our economy and society, while enabling us to play our part in mitigating climate change. And that takes investment – both public and private.

Above all, it must come from real investment in people’s skills and capabilities, in infrastructure and innovation.

In other words, it can’t come from short-termism or tinkering around the edges.

To start developing that common vision for the long-term, the CBI has published our Business Manifesto.

Co-created with our members, it draws on insights from firms of all sectors, right across the UK, to set a roadmap to growth.

That includes big choices in three areas.

First making the UK a trusted destination for investment. 

To get to the heart of this, our team at CBI economics did extensive interviews with business leaders about what influenced the choice to invest in the UK. One third of firms we spoke to said, over the last seven years, they have lost investments because of UK-specific factors. Rising to 38 per cent of foreign-owned firms.

And over half expressed a negative view about the UK as a place to invest – rising to 90 per cent of UK-owned firms. There was a sense that without bold action, the UK’s competitiveness is slowing drifting away.

The solution is not to rest on our laurels. We need to make decisions quickly and strategically. This means a much more agile and proportionate approach to regulation that puts investment above politics. With regulators well resourced to do their jobs quickly and efficiently. We can’t lose out on life-changing new medicines because the MRHA doesn’t have enough experts on hand. Local authorities must be enabled to decide about net zero housing to meet both local and national need. A strategic approach to grid connections to prioritise decarbonisation across industry.

We must also strengthen our pitch to international investors. We can do that by building on the great work of the Harrington Review, by delivering an Investment Strategy, and by bolstering the Office for Investment. And we can go further – with a trade strategy that backs our strength in services, as the world’s second largest exporter.

Second, we need to be open to talent.

Here the choice is to not only ease labour shortages by helping people to find and stay in work but to use all the tools available, including immigration, to unlock investment and transform the economy.

Immigration has become political but it doesn’t need to be. We can be more confident in setting out a balanced view. Our research shows more than two-thirds of firms have been hit by labour shortages in the last year and over a third have been unable to grow as a result.

Immigration restrictions are exacerbating that, and firms are worried about the rise to the working visa salary threshold coming in April.

As an immigrant both from and to the UK, I and many business leaders I speak with, feel we should celebrate more the contribution that immigrants make to our economy whether they come here to study, work in our NHS or lead our world-beating businesses.

Construction firms have told us there are currently 41,000 vacancies across their sector, and the changes to salary thresholds for immigration could affect 5000 more jobs – increasing costs and affecting government projects.

In universities too, one member told us even the announcement of a consultation on the post-study work visa has started to hit international student numbers. Yet each year, overseas students add £42bn to the economy.

Third is how we make sure green growth benefits everyone.

This too cannot get lost in political debate. To reach our net zero target by 2050 will take raising green investment from £10bn to £50bn per year by 2030.

The majority will need to come from the private sector. But public sector investment in green technologies is essential as a catalyst to crowd that in. Whether that is de-risking Sustainable Aviation Fuels through contracts for difference, or helping our public buildings to move to low carbon heat and our social housing sector to insulate homes, lowering bills.

Just look at the Port of Tyne, a fantastic CBI member I visited two weeks ago. Last year they secured £100m for their Tyne 2050 project – half catalytic public investment; half all-important private sector investment.

But in the UK, overall public sector investment is too low and too volatile. The average OECD country invests nearly fifty per cent more. Public and private sector investment is not either-or – one follows the other. And over the next decade, all investment will need to align to a net zero economy, it’s just a matter of how quickly we get there.

And the evidence is clear: failing to invest now means higher adaptation costs in the long-term. So, our choice is doubling down on investment, or losing the chance for growth and incurring bigger costs down the line and a worse outcome for our planet, and for people.

The courage to look to the long game:

Now, all three of these are big choices for our economy – and they call for bold moves in response.

That’s the message we’re taking to politicians and civil servants. In meetings with Gareth Davies and Ed Miliband last week. In meetings across all parties ahead of the election. The good news is, right now we have a receptive audience. There is consensus on the need for long-term, sustainable growth.

We saw it in the Autumn Statement, when the Chancellor delivered some important policies the CBI had long been calling for…

… Like permanent full expensing.

… Like strengthening the focus on occupational health to support people back into work.

… And reforming the grid connection process, to cut project waiting times.

We saw it just last week, when Labour took up our Manifesto recommendation for a business tax roadmap, and committed to keep full expensing.

And we will continue to build on areas of consensus and ambition for the UK, so businesses have the stability and certainty they crave.

Now in this year of elections, we need all parties to stay the course on the economy – and have the courage to keep looking to the long game.

Yes, there will be more big choices to come, but sometimes the boldest move is to build on what’s already there.

The Autumn Statement laid the foundations for growth.

And we have urged the Chancellor to use the Spring Statement to firm up those foundations.

Firming up the foundations of growth

I want to tell you about just three of those smart, targeted moves he can take on march 6th and why they matter.

First, improving investment incentives

Making full expensing permanent for investment was a huge building block for growth. Our analysis shows it can boost investment by up to 21 per cent – £52bn by 2030. Now, the Chancellor should extend the scheme to leased assets.  Even though renting equipment can be one of the best ways for firms to access new technology and good for the planet too, the system doesn’t include this.

Our research shows as much as forty per cent of firms would invest more if there was full expensing for renting and leasing.

Second, help tackle rising costs for businesses and people across the UK.

In our research, firms we spoke to who were negative about the UK as a place to invest said the top reason was the rising cost of business.

For many businesses, their property tax or business rates bill is set to increase by another 6.7 per cent in April. And this will impact some of the large employers in retail, hospitality and manufacturing.

Our Business Manifesto calls for the next government to prioritise rates reform to help businesses invest in our high streets. And in the short-term, we’re asking the Chancellor to cap the increase at 2.8 per cent, in line with where inflation is likely to be in spring.

We need that to hold down the cost of doing business, allowing firms to do more to tackle the cost of living.

Currently, firms are also discouraged from donating unsold stock by our tax system. But if Government expanded VAT relief to exempt charities and companies when goods are donated free of charge, companies  could give a greater volume of essential household products to struggling families, and we would see less waste in our economy. This is a policy also backed by the coalition of compassion Gordon brown will talk about later today.

Third, Government can help businesses support people into work.

Government’s childcare announcement was a great step that could help as many as 60,000 parents into work. But it must now deliver on that, and make sure all parents can access high quality places. As one parent said to me, when my kids were young, your career is only as good as your childcare – and the flexibility and support your boss gives you to be both a great parent and employee.

We have to look at health too – currently, a record 2.8 million people are out of work due to long-term sickness.

We’ve provided expert advice to the government on designing occupational health tax incentives to help change that. we can go further by removing tax barriers so employers can focus more on preventative measures. A great start would be making Employee Assistance Programmes a fully tax-free benefit.

That’s a smart intervention that can support many more people, bolster our workforce, and firm up the foundations for growth.

And look, we all know growth doesn’t happen overnight – there are no quick fixes.

It’s only going to come from national movement over the long-term.

Across politics, sectors and regions – business and government.

But we can do it. And our promise to you is that the CBI will keep championing that cause, working with government and politicians from all sides of the house, driving partnership and consensus – for the benefit of everyone.

Thank you.