13 March 2018

  |  CBI Press Team

News

Renationalisation would cause immense damage to UK economy & reputation

CBI President warns against ideology over evidence

Renationalisation would cause immense damage to UK economy & reputation

Renationalising large parts of our economy would cause serious harm to the UK’s reputation as a place to invest and a home for business, the CBI President, Paul Drechsler, has said in a speech. It would also "hurt those who most need our support and help". It is a threat that ranks alongside the prospect of a hard Brexit in its damaging impact on the UK economy and reputation.

In a speech to senior business leaders in central London, Mr Drechsler will say that the UK remains fundamentally a great place to do business. He warned that ‘era-defining choices’ ahead must be made on the basis of evidence – on what is best for jobs, investment and living standards throughout the UK.

He will also argue that lessons must be learnt from the collapse of Carillion and a refreshed approach from the private sector and the Government is required to ensure there is a true partnership when delivering public services. Paul will say that “low-cost deals may look cheap in the short-term, but that doesn’t mean they deliver value in the long-term”.

On the opportunities from global growth, Mr Drechsler said:

“The IMF has reported that in 2017, 120 countries saw economic growth. That’s fantastic news for UK companies plugged into the global economy. And let’s be clear, the fundamentals that make the UK a great place to do business are still there.

“UK businesses stand ready to seize the opportunities. To grow, provide jobs, and raise living standards. But this must be supported, not derailed, by taking the wrong choices for our country. Those choices are era-defining.”

On the risk from ideology over evidence, he said:

“The UK must navigate its way between two significant threats. On the one hand, there’s a real risk of a hard Brexit. On the other there’s a nationalising ideology.

“Now, some are saying: ‘don’t worry, it’s not going to happen’. ‘We’ll get a Brexit deal.’

‘And no one’s going to be taking private assets into state hands.’ That may be. I don’t make predictions. Not when it comes to politics!

“But the first lesson in business is, confidence is everything. And every day, I’m hearing of potential investors in this country reaching for their coats.

“Because they’re not going to risk putting their money into an economy that soon might face export barriers to its single biggest market.

“Let alone invest in companies, assets and services that could soon be taken over by the state.

“For anyone who looks, the signs are already there. The US is growing at 3%. Germany at 2.5% and China and India both at 7%. But we’re looking at growth here of only 1.5% this year. We’ve slipped from the near the top of the global growth premier league to near the bottom. Almost every day I hear of investment being postponed or cancelled or jobs being moved overseas.

“And while we argue ideology, the world isn’t going to wait for us to catch up.”

On the threats of a hard Brexit and nationalisation, Mr Drechsler said:

“We can take nothing for granted. Drop the ideology and focus on the evidence.

“You want the hardest-of-hard Brexits? Show me the evidence that hard Brexit will deliver more jobs, prosperity and trade for our country.

“But if not, we have got the evidence on the best way forward. From thousands of conversations with thousands of businesses – a customs union, and a deep relationship with the single market.

“So you want to nationalise energy, rail and water, and bring public services contracts back in-house? Let’s see the evidence that it will deliver a better service to consumers at a lower cost.

“Now, there are things we can agree on with Labour. Including their backing of the CBI’s customs union proposal. But their policies on nationalisation aren’t driven by evidence. They’re driven by ideology.

 “And it’s our job to bring the debate back to the evidence. Since the early 1990s, private energy companies have helped us cut the UK’s emissions by over 40%, while our economy has grown by two thirds.

“Our clean energy industry is transforming how we power our country. The cost of offshore wind has fallen by half in the past two years alone. And it employs thousands in high-skilled jobs.

“Then there’s what’s been achieved by the private water companies. The quality of our water is among the best in the world. Leaks have been cut by a third.

 “And in our rail industry passenger numbers have more than doubled in less than 20 years and our railways are on many measures the safest in Europe.

“In all, 45% of our infrastructure investment is being delivered through private investment. Yet all these industries – energy, water and rail –  are in line to be taken into state ownership under Labour.”

On Carillion and the future of private-public partnerships, he said:

“Of course, not every company gets everything right all the time. We’ve got more to do on the gender pay gap, on transparency, on trust in business.

“Sometimes the most dangerous risk is the self-inflicted wound. Today, every business leader is in the business of trust. Get things wrong, and we lose that trust.

“In today’s world, the fastest route to company extinction is a damaged reputation. And there’s no production line in the world that can rebuild a reputation.

“The sorry collapse of Carillion was a wake-up call. It’s a sad thing when a business goes under.

“In the aftermath, we need openness and honesty about what happened.

“But we must not lose perspective. Most public-private partnerships work well. Over 200,000 companies deliver contracts for the public sector. They can – and do – accelerate investment in communities at a time when public services are under pressure.

“Whether it’s new ways to care for elderly people, new schools, or upgrading our infrastructure. And they can do so efficiently.

“Yet I think one lesson from Carillion is already clear. A public-private partnership must be exactly that - a partnership.

“My message to the government is - low-cost deals may look cheap in the short-term, but that doesn’t mean they deliver value in the long-term.

“With public finances under pressure, changing mindsets won’t be easy. It’ll require greater commercial skills in the public sector to help tell the difference between a too-cheap deal and a good-value deal.

“And, actually, the government gets this. But the opposition? I’m doubtful. Their goal of reducing inequality is surely right. Yet that that’s unlikely to be achieved without involving business.

“But it’s not just the politicians who need to reflect. Businesses must do so too.

“That means saying no to contracts that aren’t fit for purpose. Again, it’s about a rigorous appraisal of the evidence. Because whether we’re dealing with ideology or wishful thinking about the art of the possible, let’s make the facts our guide.”