UK business leaders to be wooed by Rishi Sunak, as Labour cuts ties with CBI

Introduction: Sunak to woo corporate Britain with new business forum

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

UK corporate leaders will get a chance to lobby Rishi Sunak today, as the prime minister holds the first of a series of summits with business chiefs.

Sunak is launching a new conference called Business Connect which, the government says, will “champion the dynamism of UK businesses to unlock innovation and grow the economy”.

Boris Johnson had a notoriously dismissive view of business concerns about Brexit, but rather than firing off f-words, Sunak is aiming to repair the damage caused to relations in recent years – and fend of Keir Starmer’s efforts to make Labour the party of business.

Downing Street says today’s event will involve “direct and detailed discussions across key industries”, involving over 200 CEOs and other senior business leaders, and investors.

Diageo, Barclays and Currys are among the firms expected to attend, along with attendees from tech, life sciences and advanced manufacturing.

Sunak is expected to pledge to provide conditions for businesses to thrive and help drive the economy, so could get his ear bent over issues such as labour shortages, trade frictions with Europe, and the burden of high energy bills.

Britain’s lacklustre economic growth could come up too – with the IMF predicting the UK will be the worst-performing major economy this year.

But, one business lobbyist has told the Financial Times that his members were “wary” of Business Connect because it was not a cross-party initiative.

Sunak is also holding a LinkedIn Live event on Monday morning, where a group od “entrepreneurs, SMEs, innovators and young people” can quiz the PM.

Lobbying the government on behalf of businesses was a key role of the Confereration of British Industry. But on Friday night, the CBI mothballed its operations until June, after a flood of members quit or suspended operations following the Guardian’s reporting of alleged sexual misconduct by male employees at the lobbying group.

Yesterday, the Labour party revealed it had stopped working with the CBI.

Jonathan Ashworth, the shadow work and pensions secretary, told the BBC’s Sunday with Laura Kuenssberg programme that the lobby group needed “a root and branch review and reform process”.

Ashworth said:

“I just feel for the people who have been victims, and that the CBI has really got to get its house in order.”

The future of the CBI continues to hang in the balance; last weekend, one business leader warned its brand was “beyond repair”.

Andy Wood, chief executive of the Suffolk brewer Adnams, told BBC Radio 4’s Today programme on Saturday:

“I think probably the CBI brand is now beyond repair. It will have to reinvent itself root and branch.

The CBI is understood to be holding an all-staff meeting today to update employees on its plans. Some CBI staff are understood to be concerned about potential redundancies at the group, and surprised there’s been no discussion yet around job security.

The group faces a crucial week ahead. Early in the week it is expected to respond to a report by Fox Williams, an external law firm commissioned to carry out an independent investigation into allegations of harassment and sexual misconduct.

Rain Newton-Smith, the CBI’s former chief economist, is also this week expected to take over as director general, after being appointed this month.

Also coming up today:

The head of energy regulator Ofgem is expected to call for a new register of vulnerable households, to offer them better protection.

Ofgem is hosting a ‘Vulnerability Summit’ to focus on the issue.

Jonathan Brearley, Ofgem’s chief executive, is expected to tell attendees:

“We should all consider building towards a joint register, not just between water and energy, but including local and national government.

“Ideally, this register would be based around a ‘tell us once’ principle –where families who have vulnerabilities tell one agency about this and, with permission, this is shared across the others with a single, reliable source of data to anticipate, identify, and respond to the needs of those customers.”

The agenda

9am BST: Ofgem holds Vulnerability Summit 2023
9am BST: Ifo survey of Germany’s business climate
1.30pm BST: Chicago Fed index of US economic activity

Key events

Keith Anderson, chief executive of Scottish Power, takes the microphone… and challenges Sunak about UK investment.

Anderson says Scottish Power recently completed a £1.3bn investment in renewable power. (to fund 95 wind turbines at an offshore wind farm off the coast of Norfolk).

Anderson says he has another £10bn readyto go – but how do we ensure that money goes into the UK supply chain?

Sunak thanks him for the investment – saying the UK has the three largest offshore wind farms in the world.

The regulatory environment is key – Sunak cites the UK’s Contract for Difference pricing model which gives low-carbon companies a guaranteed return, and which has pushed down the cost of green energy.

The UK Infrastructure Bank can also help fill financing gaps, Sunak adds, to cut help carbon emissions in a way that creates jobs here at home.

Rishi Sunak says the UK must have a tax system that supports investment in film and TV production.

But skills matters too – Sunak says creative industries tell him they will keep investing in the UK, as long as we’re training the next generation of visual effects specialists or suchlike.

Sunak says he recently visited the London Screen Academy, a sixth-form academy in North London that’s training the next generation of workers in the film and television industries.

We need to make sure that we’re replicating institutions like that across the country.

Rishi Sunak has begun speaking to UK corporate chiefs at his Business Connect event in London.

He tells them the government is “unashamedly pro business”, and that both big and small firms should know that the government has “got their back”.

The UK is depending on businesses to create jobs and prosperity, Sunak explains.

Sunak says govt wants businesses small and large to know that the govt has “got your back”. Apparently 200 business leaders in the audience today who will be quizzing the PM shortly.

— Matt Gooding (@MattGoodingTM) April 24, 2023

The crisis at the CBI is creating a scramble to fill the void, now that the group is mothballed until it holds an emergency meeting to discuss its future in June.

WPI Strategy, a public affairs and strategic communications consultancy, is setting up a new body called BizUK which – it says – could play a temporary role ahead of the next election.

Nick Faith, WPI’s founder and a former communications director of the Conservative-linked Policy Exchange thinktank, told the Today Programme that it was hard for the CBI to act as a collective voice for industry to political parties, now that Labour has joined the government in suspending ties with the group.

Faith says:

That’s why we are establishing BizUK, because there is a clear gap for a collective independent voice to be able to make the case for midsize and larger businesses with political parties of all colour, in a period which is hugely important over the next 12 months.

Faith said there was now a “trust deficit” between the CBI and its members, who will not want to be associated with a “tarnished brand”.

Asked what BizUK’s top priority is, Faith replied that businesses need a stable environment for investment.

What businesses crave for is stability.

What we’re seeing now with the two main leading political parties is actually an acceptance and understanding that they want stability.

Union leader Tony Burke, the president of the Confederation of Shipbuilding and Engineering Union, hopes business leaders will challenge Sunak about the impact of Brexit and the lack of an industrial strategy:

Sunak cobbled together hasty meetings with ‘business’ on LinkedIn Live Q&A at 8.30am – before hosting the first of “Business Connect” forums, with 200 CEOs. Hope they show some spine & tell him Brexit & no industrial strategy is a disaster. @dgbailey

— Tony Burke (@TonyBurke2010) April 24, 2023

(The UK’s Industrial Strategy was ‘transitioned’ into the Plan for Growth, to include a focus on existing, new and emerging industries)

Rishi Sunak was then challenged about the skills shortage on artificial intelligence – an area where OpenAI has made some remarkable progress with GPT-4.

Sunak told his Linkedin Live event that the UK must “be ready to take advantage of the opportunities of AI”.

Last month the goverment proposed a pro-innovation approach to AI regulation, in a new white paper.

Rishi Sunak asked in LinkedIn Q&A how the UK will regulate AI to stop it becoming “uncontrollable and potentially malicious”.

He points to recent AI white paper and says policy is intended to “take advantage of the opportunities that are there but also put safeguards in place”

— Hugo Gye (@HugoGye) April 24, 2023

It wasn’t the most rigorous interrogation of the PM, though, as HuffPost’s Sophia Sleigh tweets:

PM Rishi Sunak getting lucky in his LinkedIn Business Connect Q&A – all the questions seem to be about issues he wants to talk about! And James Caan just happened to be there to ask first question pic.twitter.com/9EXUuQap9r

— David Wilcock (@DavidTWilcock) April 24, 2023

Sunak: the economy is changing

Rishi Sunak has kicked off his first LinkedIn Live Q&A event, with a call for “innovative” routes for people to gain skills in the workplace.

The PM was asked how the UK can ensure it has the skills to be a leading destination for future investment.

He pointed out that people will need to reskill at different stages of their careers and lives, saying:

“Government’s got to keep pace with how the economy is changing.

“We don’t have this old linear model of people going from school to college, to university, to job for life. That’s not how it works anymore.

“So we need to make sure that there are lots of different routes for people to get the skills they need at any stage in their life and career.”

“We need to keep talking to businesses, identifying where the gaps are, and then finding innovative ways to fill them.”

Financial watchdog cracks down on money laundering through Post Office

A series of measures designed to reduce the risk of money laundering via the UK Post Office have just been announced.

The Financial Conduct Authority says it is “putting banks on alert”, in the fight against money laundering. It wants them to cut deposit limits, keep a closer eye out for suspicious activity, and alert the authorities faster when it posts problems.

The UK’s National Economic Crime Centre estimates that hundreds of millions are laundered each year through the cash deposit channel at the Post Office – and the FCA wants this tightened up.

Sheldon Mills, Executive Director of Consumers and Competition at the FCA, said:

‘We have worked in partnership with law enforcement, industry and government to ensure people and businesses can still draw on the vital cash banking services provided by the Post Office, while addressing gaps that criminals could abuse.

The FCA has laid out new measures for banks, including:

A move towards card-based transactions and away from paying-in slips, where possible, to allow enhanced monitoring.
Upskilling staff to spot patterns of suspicious activity.
Enhancing monitoring capabilities in banks which allow them to identify suspicious activity.
Reducing cash deposit limits at the Post Office, subject to customer arrangements, to below the existing limit of £20,000 per transaction. Banks should take a data-led approach and consider whether a tailored offer is appropriate.
Reducing the time taken to submit Suspicious Activity Reports to the National Crime Agency (NCA), enabling them to take timely action.
Improving intelligence sharing so that information is passed on to other firms, law enforcement and the FCA on a regular basis.

The asking price of UK homes has inched up in the last month, by 0.2%, as calm returned to the housing market after the chaos of the mini-budget last year.

This lifted the average price-tag on UK homes to £366,s47, up £890 versus last month, according to Rightmove.

The situation is toughest for first-time buyers – the properties they typically aim for have hit a record high price, as covered here.

Victoria Scholar, head of investment at interactive investor, tells us:

The housing market appears to be showing signs of stabilisation as mortgage rates come off the highs seen in the aftermath of the mini-budget, rental prices rise making buying look increasingly attractive, and sellers cut asking prices to bolster demand for properties.

The economy is also proving to be more resilient than last year’s expectations with the UK now forecast to stave off a recession this year as inflation finally cools.”

Several UK business chiefs are backing Rishi Sunak’s new “Business Connect” forum as it kicks off today.

Debra Crew, CEO-designate of drinks giant Diageo, is pleased to see Downing Street engaging with businesses:

“Such high level engagement by the Prime Minister and other members of the Government is really welcome for Diageo. We see Business Connect as a great opportunity to promote international trade in Scotch and spirits, an export powerhouse that is bringing jobs and investment to Scotland and across the UK.”

C.S. Venkatakrishnan, group chief executive of Barclays, said:

“I am pleased to join the UK Government and business leaders in the discussion about the growth opportunities that lie ahead for the United Kingdom.

The UK continues to be a prominent financial centre that sits at the heart of global capital markets and Barclays continues to support the UK Government’s ambitious plans to drive prosperity and economic growth for people and businesses here in the UK and beyond.”

Alex Baldock, group chief executive of Currys PLC, will be attending too, and says:

“It’s important that business can make its voice heard in government at events like today’s. Given the size of the retail sector in the UK, we’re well placed to help power the UK’s growth. I’m looking forward to discussing with ministers the skills, infrastructure, regulatory and tax environment we need in order to do so.”

UK economic troubles push profit warnings back to Covid-19 levels

Profit warnings from UK-listed companies are continuing to rise, casting a shadow over Rishi Sunak’s push to win back support from corporate Britain today.

UK-listed companies issued 75 profit warnings in the first quarter of this year, new data from EY-Parthenon this morning shows. That’s the highest first quarter total since the early stages of the pandemic in 2020, and above the 10-year quarterly average.

Many of these warnings were triggered by economic uncertainty – with a third blamed on delayed, reviewed, or cancelled contracts, as clients paused or slashed their spending.

There was a surge in turmoil in the technology and telecommunications (TMT) sectors too, with warnings almost tripling year-on-year to 16 in total. They have been hit by cost-cutting, uncertain demand, and difficulties in accessing capital.

That should worry the government, given chancellor Jeremy Hunt’s goal of making the UK the “next Silicon Valley”.

Will Fisher, EY UK Strategy and Transactions TMT Leader, explains:

“Significant disruption and uncertainty, particularly in consumer facing markets, is having a knock-on effect on the TMT sector as businesses revaluate their cost bases and delay purchasing decisions.

The result is short-term revenue growth challenges for TMT companies, many of which are also trying to prioritise profitability and cash flow as they face a tighter and more expensive lending environment.

Prime Minister Rishi Sunak says today’s summit with UK corporate leaders is part of his growth push:

“Business Connect provides the next fantastic opportunity to demonstrate how we are growing the economy. We are bringing together some of the UK’s biggest companies and investors for meaningful dialogue – and I’m a Prime Minister passionate about working with business to unlock opportunity and progress.

“Since taking office, I’ve spoken to over 1000 business people – because they are the innovators and change-makers at the heart of our economy, supporting jobs, attracting investment and driving growth.

“The UK can be proud of its business credentials. Through the creation of 162 tech unicorns, smarter regulation and world-leading universities – we’ve got the right ingredients to double down on growing the economy.”

But…. the IMF fears the UK will shrink 0.3% this year, putting it at the back of the leading G7 countries….

A chart showing IMF growth forecasts