CBI @10am: Geopolitical and economic update

Giles Wilkes

On the war in Ukraine: 

• The impact of economic sanctions for Russia 
• Thing have happened in the last week that weren’t on the radar of forecasters a few weeks ago i.e. the total closure of the central bank, which means that you can’t support the ruble.  
• The sanctions will have a crippling effect on ordinary Russians 

On growth: 

• We are dealing with the same fundamental theories in the conservative government that we had for Mandelson in ’09, Osbourne in 2011, Vince Cable’s industrial strategy etc. 
• Rishi Sunak’s plan for jobs has the same building blocks as these previous plans. 
• Unless you’re doing something different why would you expect a different result? 
• On the proposals for a permanent investment deduction, it’s the right thing to be thinking about but does it work? 

• The Treasury has said they want to do something about investment and they know what doesn’t work, so it’s possible they’ll look to something like super deductions as a solution. 
• But business also needs a powerful reason to invest, which means big growing markets and creating exciting opportunities.  
• Investment incentives on the tax side alone aren’t enough to get us out of this. 
• Mid-sized businesses need to be recognised as a powerhouse of the UK economy.  
• The tax system is riddled with ideas that are great with supporting small businesses, but they become less relevant as you grow.  

• This hinders growth and has led to a tax system that is anti-growth and anti-productivity. 
• Green growth hasn’t been forgotten either.  
• It may require higher initial investment costs to make the long-term saving, which is particularly acute during a cost of living crisis, but the long-term economic benefits outweighs the cost of initial investment which is better for economic resilience overall. 

Andy Wood OBE DL 

• Adnams operates out of Suffolk, which is only a couple of hours from London, but suffers real infrastructure issues, which impacts the talent they can attract from the surrounding area.  

• There a lot of young people in the surrounding area, but without the proper infrastructure in place they cannot travel to the jobs available at Adnams. 
• It’s not just about attracting new talent and skills, but also about retraining the current workforce and attracting those who have left the jobs market back into meaningful roles.   
• Adnams was working on sustainability long before it entered the corporate lexicon.  
• Business needs government encouragement to get on with investing in sustainable solutions – every 5 years that goes by and they don’t the cost of doing so goes up.  
• On green investment incentives, there needs to be more of a holistic view on this because innovative systems of decarbonisation will be created that the current tax system can’t deal with them. 

• These incentives also need to focus on mid-sized businesses who invest not only jobs and money into the local economy, but also create a sense of place in the communities they operate in.

Rain Newton-Smith

On Ukraine: 

• The first role of the CBI is supporting businesses with staff members with connections to the war and the humanitarian crisis.  
• The CBI’s international team are working closely to monitor the situation in Ukraine and are engaging with the Foreign, Commonwealth and Development Office (FCDO) and Department of International Trade (DIT) as well as our European counterparts, on the sanctions being imposed against Russia and its impact on business. 

• For members, the intentional team have produced this helpful article highlighting what business support is available in lights of sanction accountments. 
• CBI Economics has produced a briefing analysing the impact on the UK economy via four main channels: energy (and other commodities), trade, financial links and confidence.   
• DIT has set up a dedicated online service for questions on trading with Ukraine and Russia, which is open 7 days a week 08:00-20:00. 

• Please get in touch with the CBI at insights@cbi.org.uk to share any insight or ask questions. 

On growth: 

• The economy we want can’t be delivered on 1% growth. Without a more ambitious growth rate of 2.5%, the economy we want slips through our fingers.  
• So the CBI has pulled together a set of proposals that can help get us there whilst also netting us a £100bn prize for the UK economy.  
• These proposals include: 

1. A permanent investment deduction 

1. Turn the Apprenticeship Levy into a Skills Challenge Fund   

1. Create an independent Council for Future Skills – modelled on the Low Pay Commission 

1. Tackle high energy prices by improving home energy efficiency   

1. Create an Office for Future Regulation