The humbling of the CBI

Is Britain’s leading business lobby too keen to kiss and make up with the government?

July 21, 2021
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A speech by the new DG, Tony Danker. PA Images / Alamy Stock Photo

For most of the five years since the Brexit referendum, the relationship between the Confederation of British Industry and the Conservative government has been tense and fractious. More recently the CBI, under new leadership, has been anxious to mend relations soured through Brexit. Is the business lobby in danger of overdoing the love-in?

Since the CBI represents business and the Conservatives have historically seen themselves as the natural home of business, you might expect the two to get along. In fact, there have been previous skirmishes since the CBI was established in 1965. Notably, in 1980, its director-general Terence Beckett promised a “bare-knuckle fight” with Margaret Thatcher’s government to relieve the economic squeeze that was causing so many manufacturing firms to buckle. By and large, however, Tory governments have paid attention to what the CBI has to say.

All that changed with the referendum. The CBI had set itself up as the fall guy by making the business case for remaining in the European Union ahead of the vote in June 2016. In March that year Carolyn Fairbairn, its director-general between 2015 and 2020, declared: “The message from our members is resounding—most want the UK to stay in the EU because it is better for their business, jobs and prosperity.”

After the vote to leave the EU, the business group argued for what Fairbairn called a “good Brexit deal.” Speaking in January 2018, when Theresa May’s government was itself trying to work out what that might be, the CBI’s boss advocated a business-friendly compromise rather than sticking to ideological red lines. She dismissed a rudimentary deal of the kind Canada has with the EU as “an ocean away from what we need,” saying that it would be “a bad Brexit outcome for the UK.” She appealed for the government to keep membership of the EU customs union on the table, saying that among other things it would serve as a “practical, real-world answer” to the problem of the Irish border.

That year, May did move a long way towards the CBI’s position, culminating in the Chequers proposals of July 2018, which triggered Boris Johnson’s resignation as foreign secretary. Johnson, who claimed May’s deal amounted to a “semi-Brexit,” had already made clear that the intervention of business on the side of a soft departure in the debate was unwelcome. The previous month he was reported to have said “fuck business” when asked at a diplomatic event about companies warning of the dire consequences of no deal. More than his undiplomatic choice of language, this was an extraordinary thing for any Conservative minister to say, given that the Tory party had long prided itself as being a bastion of business.

In power and backed by the commanding electoral majority he won in December 2019, Johnson has delivered on the sentiment behind that notorious remark. The deal that he eventually secured last December was indeed a Canada-style one (as he himself described it when announcing the agreement on Christmas Eve), with all the disadvantages that Fairbairn had itemised in her speech almost three years earlier. As she had pointed out then, “what for Canada represents a lowering of trade barriers would for the UK represent a raising of trade barriers.” That lowering of barriers for Canada affected less than 10 per cent of its trade; the raising of them for the UK would affect half of its trade.

Despite the shortcomings of Johnson’s trade deal, the CBI is seeking to move beyond Brexit and promote the interests of business in an economy now outside the European single market and customs union. But the change of tack means that the business group is now surprisingly ready to see merit where it previously saw demerit. Writing in its recently released annual report, the CBI’s president, Karan Bilimoria (a crossbench peer in the House of Lords), claimed: “There are great economic prizes for the UK through the EU deal with zero tariffs and zero quotas, to creating a new model of competitiveness outside the European Union, and levelling up our country, rejecting protectionism and increasing the UK’s role on the global stage.”

Under Tony Danker, who replaced Fairbairn as director-general last November, the CBI has pressed for some practical steps to improve the trading relationship with the EU. However, Danker has made clear that he wants to change the subject. In particular, he has prioritised an ambitious new economic strategy, called “Seize the moment.” This starts breathlessly, as if it were coming from an advertising agency trying to gain a new client: “Here’s our pitch. This is a once-in-a-generation opportunity to unite as a nation and agree to transform the UK economy for the decade ahead.”

Could that client be the government? Speaking to the BBC in late May when the strategy was launched, Danker accepted that business and government had been “at odds” over the past five years: “Brexit was very divisive.” But that had changed: “we find ourselves in total alignment about what needs to be done,” such as making the economy regionally fairer and greener.

Indeed, the CBI’s strategy explicitly piggybacks on the government’s own growth plan to “Build back better,” aiming to “accelerate progress” and setting out what business can contribute. This may be unwise, since there is no guarantee that ministers will stick to that unimpressive blueprint, which was set out by the Treasury in March this year. The new plan replaced the industrial strategy launched in 2017 under May, which was itself the third within a decade. Expecting consistency of purpose from any British government, let alone one headed by a prime minister notorious for changing his mind, is a triumph of hope over experience.

Moreover, the CBI risks overbidding in its desire to help. Take the government’s proclaimed mission of “levelling up” poorer regions, still a slogan in search of a strategy judging by the prime minister’s recent rambling speech in Coventry. The business organisation suggests it could be commissioned “to develop coalitions that can scale up economic clusters around the country and write the playbook for how to build distinctive regional and national comparative advantage.” Even peeling away the unappetising jargon, such a role for the CBI would be hard to swallow. Clusters such as the City of London (now being scaled down as a consequence of Johnson’s neglect of the financial sector in his trade agreement with the EU) emerge through market forces. It may be possible to foster their growth, but that is the job of government, requiring in particular more effective city region authorities to mobilise and orchestrate support, as David Sainsbury has recently argued.

It is understandable that the CBI wants to re-establish a good working relationship with the government. But it would retain more credibility if it wasn’t quite so eager now to commit itself to the incoherent economic agenda of a populist prime minister who paid scant heed to the pleas of business when negotiating his bad Brexit deal. An effective relationship between business and government has to be grounded on mutual respect.