The Blog

Why British Business is Turning to Labour?

By Joseph Vambe

As the United Kingdom gears up for a General Election on Thursday, 4th July 2024, an intriguing shift in political allegiances is unfolding within the business community. For the first time in many years, the Labour Party appears to be the preferred choice among business leaders, with endorsements coming from over 120 prominent figures across various sectors. This unexpected development raises an important question: has Labour become the new home for British business? 

Traditionally, the Conservative Party has enjoyed strong support from the business sector, advocating for policies that promote economic liberalisation, lower taxes, and deregulation. However, in recent years, a growing dissatisfaction has emerged among business leaders regarding the Conservatives’ handling of the economy. The Brexit referendum and the turbulent tenure of Liz Truss, whose tax-cutting mini-budget unsettled markets and led to soaring interest rates, have significantly eroded confidence in the Conservatives’ economic stewardship. 

Under the leadership of Sir Keir Starmer and Shadow Chancellor Rachel Reeves, the Labour Party has seized this opportunity to court the business community. Their efforts have culminated in a letter published in The Times, signed by over 120 business executives, including notable figures such as Sir Malcolm Walker, founder of Iceland, Jimmy Wales, founder of Wikipedia, and renowned chef and restaurateur Tom Kerridge. This coalition spans various industries, from finance and retail to technology and hospitality, indicating a broad-based shift in business sentiment. 

The letter criticises the Conservatives for 14 years of “instability, stagnation, and a lack of long-term focus,” arguing that these issues have stymied the UK’s economic potential. The signatories express confidence in Labour’s ability to restore stability and stimulate growth, highlighting the party’s commitment to fiscal discipline and strategic economic planning. 

Rachel Reeves has been instrumental in Labour’s campaign to rebrand itself as the party of business. In her first major speech of the election campaign, delivered at Rolls Royce’s factory in Derby, Reeves vowed to lead “the most pro-growth Treasury in our country’s history.” She emphasised that Labour’s plans for economic growth are built on a partnership with business, promising to bring stability and certainty to the economic landscape—an area where she argues the Conservatives have fallen short. 

This endorsement from business leaders marks a significant departure from the anti-business rhetoric that characterised Jeremy Corbyn’s leadership. Under Corbyn, Labour suffered its worst election defeat since 1935 in 2019, as many business leaders were wary of his radical economic policies, which included plans for extensive nationalisation and increased taxes on the wealthy. In contrast, Starmer and Reeves have worked diligently to present a centrist, pro-business Labour Party that recognises the private sector’s crucial role in driving economic growth. 

The business leaders backing Labour are not confined to small and medium enterprises (SMEs). The list of signatories includes figures from major corporations and financial institutions, although it notably lacks current CEOs of FTSE 100 companies. Critics, including Conservative Work and Pensions Secretary Mel Stride, have pointed out this omission, arguing that Labour’s support base within the business community is not as comprehensive as it seems. Stride highlights the absence of current leaders from FTSE 100 firms, suggesting that the largest and most influential businesses remain sceptical of Labour’s economic policies. 

Despite this criticism, the breadth of support from a diverse range of businesses cannot be overlooked. The signatories include former executives from JP Morgan, Heathrow, and Aston Martin, as well as leaders of innovative startups and SMEs. This suggests a growing confidence in Labour’s ability to create a conducive environment for business growth, investment, and innovation. 

Several factors have contributed to the shift in business support towards Labour. Firstly, the economic uncertainty and instability that have plagued the UK since the Brexit vote have eroded confidence in the Conservatives’ ability to manage the economy effectively. The government’s handling of the COVID-19 pandemic, followed by the chaotic fallout from Liz Truss’s brief premiership, has further tarnished the Conservative Party’s reputation for economic competence. In contrast, Labour’s emphasis on stability and strategic economic planning resonates with business leaders seeking a predictable and supportive environment for investment. 

Secondly, Labour’s policy proposals reflect a pragmatic approach to economic management. Reeves has committed to capping corporation tax at its current rate of 25% for the duration of the next Parliament, providing businesses with much-needed certainty. Labour also plans to publish a business tax roadmap to ensure transparency and predictability in the tax system. Additionally, Labour’s focus on investing in infrastructure, skills, and green technologies aligns with the long-term interests of many businesses. 

Labour’s commitment to being both pro-worker and pro-business, as articulated by Reeves, is ambitious but not unprecedented. Successful economies often strike a balance between supporting business growth and ensuring fair wages and working conditions. Reeves argues that the two are interdependent. A thriving business sector creates jobs and drives economic growth, while a well-paid and secure workforce contributes to productivity and consumer spending. 

Reeves’ speech in Derby underscores Labour’s vision for a partnership between government, business, and workers. She highlighted Labour’s plans to reform the skills system, replacing the Apprenticeship Levy with a new Growth and Skills Levy, and to overhaul the planning system to facilitate development and investment. These policies aim to create a more dynamic and resilient economy capable of meeting future challenges. 

However, achieving this balance will be challenging. Labour must navigate the competing interests of business leaders and trade unions, both of whom are key stakeholders in the party’s broader coalition. The recent controversy over Labour’s “New Deal for Workers”—which some unions argue has been diluted to accommodate business interests—illustrates the potential pitfalls of trying to be all things to all people. Ensuring that policies benefit both workers and businesses will require careful negotiation and compromise. 

Ultimately, the most pro-worker and pro-business action Labour can take is to grow the British economy. By creating a stable and predictable economic atmosphere, investing in infrastructure and skills, and supporting innovation and green technologies, Labour aims to unlock the UK’s economic potential. This, in turn, will benefit both businesses and workers, creating a virtuous cycle of growth and prosperity. 

As the election approaches, Labour’s ability to present itself as the home of British business will be a crucial factor in determining its success at the polls. The endorsement from a broad spectrum of business leaders suggests that Labour’s message is resonating and that the party is seen as a credible alternative to the Conservatives. However, sustaining this support will require Labour to deliver on its promises and demonstrate that it can effectively balance the needs of businesses and workers. 

If Labour can manage this delicate balancing act, it will usher in a new era of economic stability and growth for the UK. The challenge will be significant, but the potential rewards—a thriving economy, increased investment, and a better quality of life for all—make it a goal worth striving for. In the end, the true measure of Labour’s success will be its ability to create an environment where both businesses and workers can prosper, driving the UK towards a brighter economic future. 

Labour’s ambitious agenda will be put to the test if they win the election. The Party will need to work diligently to ensure that their policies do not just remain promises but translate into tangible benefits for both businesses and workers. This approach, although challenging, is pivotal. By maintaining a focus on long-term growth and stability, Labour can potentially bridge the gap between business interests and worker welfare, proving that it is indeed possible to be both pro-business and pro-worker. As Labour aims to bring about economic renewal, the key will lie in their ability to create a sustainable environment where investment, innovation, and fair work practices can thrive in harmony. If successful, Labour will not only redefine its relationship with the business community but also set a new standard for inclusive economic growth in the UK which we desperately need. 

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