Business Confidence

James Frith Excerpts

Tuesday 15th October 2024 Westminster Hall

[Mr James Frith (Bury North) (Lab)]

I am amazed to hear the hon. Gentleman’s tone the day after the business investment summit. Anyone would think that this debate is happening in a different world or galaxy. What about the billions of pounds that were pledged yesterday? That is action and commitment from businesses that have confidence in this Labour Government, with their mandate and their deep commitment to a new partnership with business. Did he not read the newspaper this morning? Those record-breaking figures spell the truth about Labour’s record-breaking commitment to business investment.

[Bradley Thomas]

In response, did the hon. Member not recognise the conditions that the Government inherited on their election in July? It has already been pointed out in this Chamber this afternoon that the Government have been rehashing billions of pounds’ worth of investment that the previous Government secured and are now passing it off as their own.

Returning to the points that I wish to make, the new Government have claimed that their election has positively impacted business confidence, but the Institute of Directors’ economic confidence index, which measures business leader optimism about the prospects for the UK economy, continued to fall in September to minus 38, having been minus 12 in August. According to the Office for National Statistics, 55% of respondents to a voluntary business survey about challenges facing the economy felt that their businesses’ performance would stay the same or decrease over the next year. The CBI’s industrial trends survey for September shows that more manufacturers think that output will fall over the next three months than think it will rise. Potentially most critically of all, GfK’s consumer confidence index fell to minus 20 in September, suggesting that consumers lack confidence in the vitality of our economy. In large part, that is due to concerns about tax rises—concerns shared by many businesses.

Instead of making the UK a hostile destination for investment, the Government should work to ensure that it is the most attractive destination possible for investment. To become an attractive destination for inward investment, we need to look urgently at the factors that will determine investment decisions. The tax burden, which rose following the global pandemic and the unprecedented level of support provided by the previous Government, is damaging business confidence through fear that there will be higher taxes after the Budget at the end of this month. We need to focus on incentives for businesses investing in large-scale capital projects, access to skills, a long-term industrial plan for the UK economy that will once again reward investment, and a concerted effort on skills development that will lead to a long-term uplift in industrial resilience. That is critical in a world in which our adversaries seek to gain advantage over us and blunt our economic edge.

We have a great opportunity to reduce our dependence on foreign imports and focus on the long term. That is particularly crucial to my constituency. I would like the Government to focus on small businesses and foster a greater sense of individual entrepreneurship at a grassroots level, which would be a massive benefit to constituencies across the country, town centres such as Bromsgrove’s, and rural businesses.

--- Later in debate ---

[Gareth Thomas]

I thank the hon. Member for his earlier remarks and his intervention. Let me be clear that my Department will continue to work with local partners in Northern Ireland, including InterTradeIreland, to develop and deliver our trade and industrial strategies. If the hon. Member wants to speak to me, I would be happy to help the small businesses that have written to him to join up with the support available in Northern Ireland.

Members across the House will be pleased that there is good news on growth. I welcome the generous support of the hon. Member for East Grinstead and Uckfield for the work done yesterday at the international investment summit and in the run-up to it. A raft of measures were announced to help boost business confidence going forward and to spur growth, and I will recap on some of them. We are determined to make it simpler for companies to relocate to the UK through a new corporate re-domiciliation regime, which I am sure will strengthen our position as a global business hub. We have announced a business-boosting lift to the thresholds on company sizes, which means we will have new legislation by the end of the year reducing the burdens on start-ups and SMEs, saving them nearly a quarter of a billion pounds. We will be consulting next year on our ambitious modernisation programme for the UK’s entire non-financial reporting regime. We are seeking to make shareholder communication easier, and we are clarifying the law on virtual annual general meetings.

Those improvements, helping to reduce red tape, could be worth up to £16 billion a year to investment going forward. As a result of the pro-innovation, pro-business, pro-wealth creation policies we are pursuing, big-hitting global businesses are confidently investing in the UK. The total investment pledged by international and British firms, both in the run-up to and during the summit yesterday, now stands at an estimated £63 billion, which will help ensure that 38,000 jobs are created. I would gently suggest that that is a resounding vote of confidence in both the UK’s economy and the Government’s growth mission.

[Mr Frith]

The Minister is making a powerful and clear argument for this Government’s commitment to a new partnership with business. Does he agree that although the sum of investment yesterday is important, grabs the headlines and gets people confident about the future, part of the brief he is responsible for is small businesses, and seeing that they get part of the large investment that was committed to? Will he explore in his final remarks how important that is to small business?

[Gareth Thomas]

If I may, I will come to that in one second.

One of the measures announced yesterday that will strengthen business confidence further, and which many businesses have been crying out for, as they told us when we were in opposition and as they have been telling us since we came into government, is an industrial strategy. All Governments have an industrial strategy, consciously or not, through act or omission. This Government are choosing actively to have and implement an industrial strategy to help businesses plan, not just for the next year but for the next 10 years and beyond. That strategy will not just help large businesses or ones in urban areas, which is something the hon. Member for Chippenham (Sarah Gibson) asked about—I congratulate her on making her first speech as an Opposition spokesperson—but benefit all parts of the country and businesses large and small.

Our industrial strategy will inject capital into eight high-productivity, high-export, high-investment sectors in which the UK has a significant competitive advantage: financial services, professional and business services, clean energy industries, digital and technologies, advanced manufacturing, life sciences, creative industries and defence. Above all, our industrial strategy will show that we are listening and responding to the needs of businesses.

To that end, we will engage on those more complex issues that we know are barriers to investment: skills, data, finance, regulation, energy prices, grid connections, infrastructure and planning, which a couple of hon. Members rightly referenced. We want to view every single one of those measures through the lens of investment promotion. That is how we will continue to build long-term confidence, ensuring that our policies are made with business, for business.

Hon. Members raised questions about our Make Work Pay plan, and the number of businesses backing that plan is striking. On flexibility for employees, over 60% of UK managers surveyed by the University of Birmingham a couple of years ago said that home working improved their teams’ motivation, and a staggering 75% said flexible working boosted their teams’ productivity —something Opposition Members have complained about in the past. It is a similar story on pay. Research by the Institute for Public Policy Research shows that 70% of managers believe that raising the national minimum wage to reflect living costs would help, not hinder, their businesses. The hon. Member for East Grinstead and Uckfield referenced the fact that many of the measures announced as part of our package will come in in 2026. That will enable us to continue to talk to businesses and employee representatives to ensure that we get the details right.

I have no doubt that the Budget on the 30th of this month will be a Budget for growth. We face a very difficult inheritance as a Government, and we have to fix the fundamentals of our economy. I gently say to the hon. Member for Broadland and Fakenham (Jerome Mayhew) that he may not be comfortable with the mess his party left us, but figures released last month show that there was another month of record Government borrowing, with debt at 100% of GDP. That is the inheritance that the previous Government left us. We have to fix those fundamentals, and we will do. It will be a Budget for growth, and I have no doubt that our economy and British business will continue to grow from strength to strength.