businesses were hesitant to back their own numbers. “They were second guessing themselves”, Tony revealed, “because they were thinking they must be totally wrong. So, they also had big recession scenarios, which were sort of minus 10%-20%.”
Nevertheless, Tony claimed that most businesses have chosen to back their central scenarios, albeit tentatively. And that is probably the safest course of action, because although there is more stability now than there was four months ago, uncertainty has not disappeared completely. “I don’t know what is going to happen this year”, Tony admitted, “but my central scenario would follow what the experts are predicting: we’ll have a short, shallow recession and by the end of the year we’ll have turned a corner.”
This outcome is in tune with the predictions of Investec Chief Economist, Philip Shaw, who joined All Together for a previous episode of our Ask an Expert podcast. Speaking in October last year, Philip said, “We think the economy will be difficult for 18 months or so and expect it to contract by up to 1% from the peak to the bottom of the cycle next year. But for comparison, the economy shrank by something like 5.5% during the financial crash of 08-09, and that’s what we would call a deep recession.”
Surprisingly, an increasing number of commentators are now suggesting the UK may even avoid a recession altogether. And although this is undoubtedly positive news for business leaders, the onus remains on the government to inject some additional pace into the UK’s return to prosperity. The way to do that, according to Tony, is to create tailwinds, signals to show the country is moving in the right direction and encourage investment. But what could the chancellor or prime minister say in a budget to convince business leaders of that? “The government’s central bet is that you just want stability”, Tony explained, “but maybe you need something more.”
Given that fiscal policy is shrinking and monetary policy is tight right now, it’s unlikely that ‘something more’ will be provided by government spending, but other ways to promote confidence do exist. “We [the CBI] have always felt that the stuff that doesn’t cost any money does make a difference”, confirmed Tony. “Things like planning permission, regulatory reform, and immigration, these things cost nothing economically, but they do make a difference.”
Nonetheless, the government still seems somewhat reluctant to explore such avenues. “For example, they are increasing corporation tax by six points in April”, Tony continued, “and the deal we had before included a super deduction to say that you can get a massive discount if you invest. Now, though, they are going to increase by six points and remove the super deduction, so it’s a double whammy for investment.”
As a means of finding a compromise, the CBI has – in its budget submission to the Chancellor last week – suggested a full expensing regime to allow profit-making businesses to claim tax back on any investments they make in year one. And even if that is not fiscally viable for the government right now, Tony explained, it could very well be done in stages. “It would essentially involve a roadmap to introduce more and more incentives”, he clarified. “That will send a signal – a tailwind – to people wondering whether to invest in Britain that we are starting a journey of incentivising investment in this country.”
“They can actually say quite a lot in the next six weeks that would steady the nerves and show that they do care about growth,” Tony reminded us. And – to his credit – Mr Sunak has already taken steps in the right direction. By creating four new departments, for instance, assigned to the areas he deems of the greatest significance, the PM now has single accountability for energy, security, & net zero; science, innovation, & technology; business & trade; and culture, media, & sport. Businesses should recognise this as an example of managerial nous because, as a reorganisation of his top team, it makes sense to unparcel the things he cares about, to elevate them at cabinet, and have a single named minister in charge.
Although Tony was sceptical as to how user friendly these reforms will prove in practice – citing the disruption caused during the creation of new departments with new IT systems, new management structures, and so on – he did recognise them as a conscious effort by the PM to focus the government’s efforts on the things that matter. And helping UK businesses to prosper is certainly a priority for him. His declaration in November that outlined his desire to help as many British ‘Unicorns’ become ‘Decacorns’ as possible, and the fact Enterprise was one of the Chancellor’s four ‘Es’ in his recent speech, is significant proof of that.
“We’ve never had as much attention on this agenda as we have right now”, Tony claimed. “Not many Prime Ministers or Presidents have been as obsessed by high-growth, innovative, technology-rich businesses as we now have, so it’s incumbent on all of us to use this window.” To that end, the CBI recently announced Project Decacorn, a collaboration between the CBI and some of the UK’s most successful entrepreneurs. Seeking out 2 or 3 big levers for government to pull, the project is seeking to put scale-up success at the heart of a UK government growth strategy.
Many of All Together’s Volunteer Advisors have joined the CBI’s Steering Group for this initiative, including Greg Jackson from Octopus and William Reeve from Goodlord. And so we will look on with interest as they reach their conclusion, and support the CBI as they campaign to have a big scale-up ambition, and these policies, implemented by government.
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Tony’s Three Things
We unfortunately ran out of time on the day to ask Tony for his Three Things – three pieces of actionable business advice you should apply in your business today. But in a follow up, Tony kindly laid out his advice in writing for you here: