John Healey’s October Budget must draw a red line under more rises in the cost of hiring, investing and doing business, the head of the CBI will say at an event in Glasgow tonight.
Speaking to business and political leaders in Glasgow, CBI chief executive Rain Newton-Smith will also warn Scotland’s First Minister John Swinney that his proposed food price cap “won’t work” and demand that prices are left to the market.
In a wide-ranging address at the CBI Scotland annual dinner, Ms Newton-Smith will call for a bold and ambitious reset of the UK’s relationship with the EU as well as a quick decision on the Jackdaw gas field.
She will remind Andy Burnham’s new government that the cost-of-living crisis “is also a cost-of-doing-business crisis” and that “the two are inseparable.”
She declares: “There is no lasting answer to the cost of living that ignores the cost of doing business.”
Ms Newton-Smith will highlight “two costs that have risen to eye watering levels – energy and hiring”, stating that more than nine out of 10 businesses have seen their energy costs rise and four out of 10 say they are cutting investment directly because of it.
“Meanwhile, the changes to National Insurance have pushed the business tax burden to the highest on record. Today, the profitability of UK business is the lowest since the 2008 financial crash.
“For a business in the UK today – when your margins are that low, and another cost lands, where does it go? In every sector, we’ve heard the same: you have just two choices.
“Either pass it on to consumers through higher prices – if demand is strong enough – or absorb it yourself, reducing your room for hiring. For investment.
“For wage rises. For growth. In a word, costs don’t disappear – they travel.”
On the forthcoming Budget on 28 October, she acknowledges that the Prime Minister and Chancellor face hard choices. The former had shown goodwill towards business and the Chancellor has said he wants to drive profit in British business, she says.
“But what’s in the Budget will be the real test. The October Budget must draw a red line under more rises in the cost of hiring, investing and doing business.
“The rise in employer National Insurance has proven a step too far. For many, costs are now too high to hire. To create more jobs for young people, to ease the pressure – we need a targeted reduction.”
On the plan for a cap on a basket of basic food items, Ms Newton-Smith will say: “The proposal of a food price cap here in Scotland won’t work. While a cap can hold down a price, it cannot bring down the cost behind it – the cost of farming, production, refrigeration, labour, energy.
“It can change the number printed on the shelf. But it does not bring down the costs running through the supply chain.
“Divert the policy energy and resources that will be wasted there – into something positive. Work with business to ease the pressure where you can and let competition do its job.”
On EU relations, she adds: “Brexit was bad for business. Bad for our economy, reducing our GDP by as much as 8%. Business leaders I speak to do not want to re-litigate the politics of it. Nor do they want to rejoin at any cost or on any terms. But they do want both sides to get on and reduce the barriers, because the status quo won’t cut it for growth.
“Nor will retreating into isolationist bunkers. The friction now is hitting Scottish business, hitting British business. The reset must be bold and ambitious. Our governments must be ready to spend political capital, to make political sacrifices – in the national economic interest.”
With a decision on the Jackdaw gas field expected next Tuesday, she says. “Given the go-ahead in 2022, it’s been stalled for too long. And the workforce – which we need for the transition too – left in limbo. Decisions delayed mean investment down the drain. We need a decision now.”
Following the speech, Ms Newton-Smith will be joined in conversation by the Scottish Secretary Douglas Alexander.
#Budget #add #business #costs #CBI #chief #Daily #Business