Last year Keir Starmer had an invitation for bosses at Labour’s first party conference in power in 15 years: “You can have your finger prints on our policy … you can shape it.” Fresh from love-bombing corporate Britain before his election landslide, the prime minister told a sold-out “business day” audience at its Liverpool get-together that he wanted his new government to “partner” with industry.
“You have the right to badger us … Our decisions will be better if we are talking to you and taking into account what you say,” Starmer said.
As Labour returns to Merseyside this weekend for its annual conference, many executives are asking: what happened? Talk of partnerships and policy shaping is a distant memory after a year of tax increases, weak growth, rising inflation and climbing unemployment.
“Fifteen months in [from the election], it has been a serious disappointment,” said Stuart Rose, the former chief executive of Marks & Spencer. “There appears to be a vacuum, and a mismatch between what’s being said and being done in terms of business engagement.
“You have a massive majority, a government saying it wants to stoke the economy and says it knows how. But it seems to be paralysed. I thought this lot would be in for two terms; now I am not convinced. And the Conservatives are in such a hole. If things keep going we’ll have a rightwing lunatic of our own, like Trump.”
For Labour, having burnished its credentials by running a “Davos on the Mersey” business gathering in recent years, repairing corporate relations is seen as a key priority within party ranks after a rocky year.
Rachel Reeves’s autumn budget will loom large for the delegates filing into the windswept Albert Dock amid mounting speculation over tax rises. So too will the figure of Andy Burnham, the Greater Manchester mayor, widely seen as a challenger to Starmer.
With the chancellor and the prime minister expected to roll the pitch for the 26 November budget, bosses in Liverpool will be on high alert for any hint of how Reeves will tackle a potential £40bn shortfall in the public finances. Global bond market investors will also be watching closely.
For many, the prospect of another tax-raising budget is adding to a sense of betrayal in City boardrooms.
“I was reasonably hopeful when they got in because I thought the last lot, the Tories, were utterly inept,” said Andrew Higginson, the chair of the FTSE 100 retailer JD Sports. “When Reeves and Starmer did the rounds it looked like they’d be a breath of a fresh air and not be like old Labour; more like a centrist, business-friendly, growth-friendly government. I think it’s fair to say they’ve been a huge disappointment, really.”
Before the general election, Higginson was among dozens of business leaders who endorsed Labour, after its “smoked salmon offensive” of City breakfasts to woo bosses. Now his view is that the party has “done nothing” in government that businesses are pleased with.
Top of the list for consternation is Reeves’s £25bn increase in employer national insurance contributions (NICs) in her first budget – a surprise measure that few if any bosses would recognise their fingerprints on.
High Street names including Sainsbury’s, Tesco, John Lewis and Boots have warned that Labour’s tax policies are driving up prices in shops. Photograph: Dan Chung/The Guardian
Business leaders broadly acknowledge the challenge Labour is facing. Entering government with the national debt at among the highest levels since the 1960s, and facing rising pressure on public services and a challenging financial market backdrop, the chancellor had an unusually tough backdrop to navigate.
Shevaun Haviland, the director of the British Chambers of Commerce, said: “We do not underestimate the challenges facing the chancellor, and don’t underestimate the importance of fiscal responsibility to creating the economic stability that all businesses rely on.”
However, the complaint is that Reeves has played a bad hand poorly. Cutting winter fuel payments cost Labour dearly in the opinion polls. For business, her first budget added extra costs for firms already struggling with sticky inflation, elevated interest rates, weak consumer confidence and a bleak global outlook.
“It is all being passed on through inflation,” said the boss of one FTSE 100 company. “Spooking the Bank of England to keep rates up. So I despair.”
Haviland said “undoubtedly” the cost of NICs continued to be felt. “[It] has hit confidence, investment and recruitment. That’s why our message to the chancellor ahead of November’s budget is clear – no new taxes on business,” she said.
With more than a month still to go before the budget, business leaders fear the chancellor has invited an autumn of tax speculation that will damage the economy.
Higginson said firms were “expecting the worst” in the budget and would plan accordingly. “We’ve seen no progress so far, which is why it’s such a disappointment, and suggests – beyond the rhetoric – that they don’t actually get it.”
On the conference floor Labour will face calls to pursue a wealth tax from union leaders and the party’s left flank – a policy with huge public backing but which is unlikely to sit well with many business delegates.
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“It is puerile, infantile politics,” said the FTSE 100 boss. “We are being run by student union politicians. We know that taxing the rich just drives them away. We should be looking to attract them.”
In recent months Labour has sought to herald billions of pounds of investment secured through its agenda to slash planning red tape, push investment in low-carbon projects, reset EU relations and cosy up to Donald Trump.
Dozens of CEOs have lined up with supportive statements, including the chair of BlackRock, Larry Fink, alongside the bosses of Revolut, Bank of America, PayPal and Citigroup after £110bn of financial services investment in the past week.
On the flip side, scores of Britain’s biggest high street names – including Tesco, Sainsbury’s, John Lewis and Boots – warn that Labour’s tax policies are driving up prices in the shops. The boss of BT has attacked “government-inflicted costs”, and pharmaceutical companies including Eli Lilly, Merck and AstraZeneca have pulled billions of pounds of projects in Britain amid a row over drug pricing.
Approving expansion at Heathrow and Gatwick has gone down well with business leaders. Photograph: Martin Godwin/The Guardian
Infrastructure investment is one area executives think Labour is getting right. Approving runway expansion projects at Heathrow and Gatwick has gone down well with business leaders, alongside taxpayer backing for nuclear projects such as Sizewell C. Union leaders welcomed the nationalisation of British Steel.
However, the conference is likely to be clouded by reported delays to Northern Powerhouse Rail – where Liverpool was to be a key beneficiary – which Reeves and Starmer had been expected to press ahead with as a tentpole conference announcement.
Despite the fraying ties, a corporate schmooze-fest is still anticipated. FTSE 100 stalwarts, energy firms, tech giants and banks have shelled out vast sums to sponsor exclusive breakfasts, drinks receptions and fringe events.
Among the corporate sponsors are Lloyds Banking Group, Uber, EDF, Ovo Energy, Microsoft, TikTok and Capita. An invite-only defence industry reception is planned for ministers, as well as a party for oil and gas execs – all under the same roof as campaign rallies for anti-war groups and environmentalists.
For corporate delegates, the cost of involvement is another grumble. This year, tickets for business day, rebadged as an “inaugural business leaders’ summit”, have galloped ahead of inflation with a price hike from £3,000 to £5,000 for C-suite executives looking for networking opportunities and to hear from senior Labour figures.
For many on the left of politics, such proximity will, however, fuel concerns that Labour has grown far too relaxed about the fingerprints of business on its policies.
After the resignation of Angela Rayner as deputy prime minister and Starmer’s reshuffle this month to appoint Peter Kyle – who has faced questions about his closeness to big tech firms – as business secretary, union leaders were left spooked.
So far Labour has sought to appease both camps, with promises to stick to its employment rights bill – much to the unease of bosses who warn the plan to bolster workers’ rights will hit the economy and chill the jobs market.
However, the challenge for Labour to please all of its 20,000-plus conference delegates is a microcosm of Starmer’s task for the nation at large. “They are trying to be what anybody can’t be: all things to all people,” Rose said. “Being a crowdpleaser always ends in disappointment.”
