Britain’s business leaders have called for stability and warned ministers against further tax rises after the resignation of Sir Keir Starmer left the UK staring down its seventh prime minister in a decade.
Reducing the cost of doing business, unlocking more long-term investment and keeping Ed Miliband out of the Treasury sit at the top of a corporate wishlist that company chiefs are now pressing on a government in transition.
Less than two years after Labour’s landslide victory under Starmer, firms are bracing for another bout of uncertainty. The worry, privately expressed by several senior figures, is that “everything will get gummed up for at least a few weeks”, with ministers effectively frozen out of decision-making while Whitehall waits for a new occupant of Number 10, most likely Andy Burnham.
Some bosses also voiced unease at the prospect of Miliband, the energy secretary, being promoted to chancellor in the next administration.
Financial markets largely took the news in their stride. Sterling rose 0.3 per cent against the dollar to $1.32 and ten-year gilt yields held broadly steady at 4.85 per cent. Traders had widely anticipated Starmer’s departure after Burnham won the Makerfield by-election last week, and the City has welcomed the outgoing mayor of Greater Manchester committing to the government’s fiscal rules, the framework that governs day-to-day spending and borrowing.
Calm pricing has not translated into calm boardrooms, however. Big-business lobbyists are lining up calls with senior officials this week, while investment banks are scheduling client discussions on how the latest reshuffle of Downing Street will redraw the political map, policy agenda and market outlook. It is a familiar pattern for firms that have already weathered repeated bouts of pre-Budget uncertainty and wavering confidence.
One business figure and Labour donor, speaking confidentially, said the “country is just desperate for direction. There really, really has to be a clear articulation of the commitments of whatever the new government is.”
They added: “If a new prime minister is going to succeed, he’s going to have to stick his neck out to commit to what is going to get sorted out very quickly and, frankly, be prepared to be judged on it in about 18 months. Top of the list would be law and order. Obviously illegal immigration and welfare reform, welfare is at crisis point.”
The same donor said they were “really happy to see the back of Starmer”, who “pretty much failed on every score”. Labour, they argued, had spent so long thinking about how to win power while saying “very little by way of commitments” that the prime minister “probably didn’t have a mandate to make some very tough decisions and get his party to fall in line. And that was one of his biggest mistakes.” The “lack of urgency”, they said, “was what was most shocking”.
Not everyone is convinced the change at the top is cause for celebration. Theo Paphitis, the former Dragons’ Den investor and owner of Ryman and Boux Avenue, cautioned that the “country needs to be careful what it wishes for. We don’t know what Andy’s policies are, or what he stands for.”
Rain Newton-Smith, chief executive of the CBI, whose members include BAE Systems, Tesco, Centrica and AstraZeneca, thanked Starmer for championing UK business and for his international leadership, but warned that the hard work was only beginning. “With geopolitical tensions high, the country now needs stability, confidence and a clear path to growth,” she said.
“The UK’s economic challenges will not disappear with a change of prime minister. The economy won’t fix itself while politicians look inwards. And you cannot tackle the cost of living without addressing the cost of doing business.”
That message echoes the CBI’s long-running warning that the burden on employers is nearing a tipping point, a theme that has run through repeated calls for ministers to hold the line on tax.
Newton-Smith pointed to a list of decisions that cannot be allowed to slip: “There are big decisions that need to be taken, whether that’s on the defence investment plan, infrastructure projects, energy price caps or the UK-EU reset. These are long-term commitments and businesses need to know that there is not going to be further drift or delay.”
For many in the boardroom, the identity of the next chancellor matters more than the identity of the next prime minister. Sir Martin Sorrell, founder of S4Capital and a veteran of the advertising industry, struck a wait-and-see note on Burnham while making clear that delivery, not hospitality, would be the test.
“We don’t know what Andy stands for. Let’s see and give him a chance. He has spoken about working with industry and business,” Sorrell said. “Last time round there were scrambled eggs and smoked salmon breakfasts, but little or no follow-through. I guess it depends to some extent on who is chancellor. Miliband would be checked by the bond vigilantes.”
That last point captures the mood. Having spent the past year on the receiving end of a rising tax bill and a hardening tone from Number 10, business is willing to extend the next prime minister some goodwill, on the strict condition that this time the commitments are clear, the chancellor is credible and, above all, the drift finally stops.