Watch the webinar
This morning's webinar was, in effect, a public version of the many behind-the-scenes conversations that the CBI has had throughout the crisis with the Labour Party’s business team; as Josh Hardie, our Deputy Director-General, was joined by Ed Miliband, the Shadow Secretary of State for Business, Energy and Industrial Strategy. Here’s what they discussed:
- The sluggishness of CBILS…
- …and what it means for manufacturers
- The jobs problem…
- …and how to fix it
The sluggishness of CLBILS…
Josh began the webinar by highlighting some of the numbers that have been released over the past 24 hours. These include the latest data on the government’s lending schemes. As of 14 June, just over £38 billion has been lent in total – with £26.3 billion accounted for by the Bounce Back Loans scheme; £10.1 billion by the Coronavirus Business Interruption Loans Scheme (CBILS); and £1.8 billion by CLBILS.
It’s the low CLBILS number that stands out – and which received the most attention in our discussion. This scheme, designed for companies that are too large for the normal CBILS but too small for the Bank of England’s corporate financing programme, was always unlikely to be as high-volume as the other schemes. But what’s concerning, Josh pointed out, is that the rate of approvals is now consistently slowing.
“How do you improve the flow?” asked Josh. The CBI is currently working on various answers – mostly aimed at “improving flexibility within the market”. This could involve “bringing non-bank lenders, fin-tech, back into this game”, so that businesses have more options.
Josh also raised the possibility of “innovations in the longer term”, such as designing a lending scheme around the British Business Bank that links funds to the achievement of sustainability goals.
…and what it means for manufacturers
Ed Miliband also focused on the CLBILS problem. “It’s too slow,” he said, “and seems to be bound up in bureaucracy.” He mentioned the issue of the seniority of loans – CBILS loans become the most senior (i.e. paid out first) on a business’s balance sheet, which often means that the business has to go through the time-consuming process of renegotiating other loans.
Because of the parameters of CLBILS, particular types of business are especially affected by these problems, Ed suggested – such as manufacturing. “I worry a lot about manufacturers who are facing very difficult circumstances; not least, global demand.” In France and Germany, he continued, manufacturers received loans “within ten days of the crisis starting”. Whereas, in Britain, “we’re three months in” and manufacturers are still struggling for funds. “I’d like to see more action and fewer working groups when it comes to our manufacturers.”
In fact, the sector-by-sector impact of the pandemic was a theme of Ed’s responses. On the wind-down of the Job Retention Scheme (JRS), he said: “You can’t treat all sectors the same…. this is a general recession, but it’s also a sectoral recession.”
The jobs problem…
In his opening remarks, Josh also mentioned the latest labour market statistics: over 600,000 people were taken off payroll between March and May. “We know that one of the major impacts of this recession is going to be unemployment,” he added.
What’s especially sobering is that that decline doesn’t include people who were on furlough, who are counted as still being employed. And so, as the JRS comes to an end over the next few months, and companies choose instead to make people redundant, the numbers are very likely to worsen.
Ed acknowledged that the JRS “has been really important” for keeping people in jobs until now – in fact, he described it as the government policy that he has “welcomed the most”.
But he also raised a few points about the continuation of the JRS in future. One was the sector-by-sector point: perhaps certain industries could be exempted from the increasing employer contributions that are going to be phased in from August. Another was about the end-date of the scheme: “Should furlough have a sharp stop in October? The government shouldn’t be too inflexible on this. We’re dealing with a moving target.”
…and how to fix it
Outside of the JRS, both Ed and Josh agreed that a lot more will need to be done to secure jobs in future. Ed put it in stark terms: “We face an unemployment crisis the likes of which we haven’t seen in this country for generations.”
So what can be done? Ed talked about the experience of the last Labour government, in the aftermath of the financial crisis. One of the policies they introduced was the Future Jobs Fund, which “was about the government paying the wages of young people for six months”. He said that the Fund “wasn’t perfect,” but it could offer a sort of template for action.
He continued, however, that “you’re [also] going to need something much bigger than that”. He even mentioned the possibility of a “army of young people,” modelled on the Civilian Conservation Corps that President Franklin D. Roosevelt introduced in the aftermath of the Great Depression to give work to three million young American men (“and, sadly, they were just men,” noted Ed). This new, more inclusive army could help to hasten Britain’s journey to net-zero emissions.
Achieving a greener economy was a large part Ed’d jobs prescription – and of the CBI’s, too. He noted that green projects have “good multipliers” (i.e. the money spent on them is returned many times over) and can “get moving fairly quickly”. Besides, the government spending that would have to done is already needed to achieve the net-zero commitment; “we’re just bringing [it] forward”.
One of the audience members asked Ed about what this would mean for the oil and gas industry. In response, he admitted that “we’re transitioning as an economy,” and that “that transition has very profound implications for the fossil fuel industries”. But he added that “we’re going to need a just transition” for people who currently work in oil and gas and who may lose their jobs in future. “We can’t just wash our hands of them.”
The idea of “just transition” underpinned much of what was said about employment. Josh highlighted some of the CBI’s own thinking in this area – particularly around making local labour markets kinder and more efficient. “If someone has become unemployed, how do we skills-match them with an available job? If there is no job, how do we given them the skills for the jobs we need?”
The discussion also strayed on to Brexit and the looming end-of-year deadline for Britain’s negotiations with the EU. What happens if time runs out and there is no deal? What is the Labour party’s position?
Ed was clear that “there has to be a deal because no-deal would be deeply damaging for thousands of businesses across the country”. But he also suggested that, in the meantime, Labour is waiting to see what the government can come up with. “We had a big argument at the general election on Brexit,” he said. “We want to respect that result. [The government] believe they can get a deal… they’ve got to get on with it.”
And if the government cannot achieve a deal, will Labour try to block a no-deal Brexit in Parliament? “We’ll have to see where we are, to be honest. We want to be constructive.”
Key questions we answered:
- Josh, what’s needed to ensure a green recovery in the UK?
- It’s crucial that a commitment to tackling climate change and achieving our net-zero target is at the centre of the recovery plan.
- The clock is still ticking, and the urgent need for action hasn’t gone away. Yes, we’ve seen a fall in global emissions this year as result of the pandemic. But it’s very likely emissions will rise again as economies reopen.
- We know investment in low-carbon technologies and infrastructure programmes will create new jobs, generate growth, and help us meet our ambitions to build a more sustainable and resilient future.
- CBI research shows that for every £1 spent on construction, £2.92 is created in overall value.
- We’re working with both the government and the opposition to ensure an employment and skills-based green economic recovery.
- Our five principles on net-zero are:
- Prioritise public spending and policy on low-carbon programmes that deliver short-term economic and social benefits and lay the foundations for a resilient, net-zero economy
- With the help of the private sector, deliver on existing fiscal commitments from the Budget to leverage investment and cut emissions.
- Look beyond the fiscal remit to drive investment and stimulate a green recovery through smarter regulation and clear policy.
- Build the foundations of a green economic recovery into plans to support businesses recovering from the pandemic.
- Coordinate a global response to climate crisis, using our leadership of COP26, G7 and G20, which are all next year.
- Ed, what is your assessment of the government’s interventions in response to this crisis?
- We have tried to be constructive and not to try and score points. The circumstances we are facing would challenge any government.
- Every viable businesses and job saved now is something we should be prioritising. The costs of inaction are greater than the cost of action.
- I commend the Chancellor for introducing the furlough scheme. He listened to the CBI and the TUC and acted quickly. However, I worry about how the furlough is being wound down in a one-size-fits-all way. I would advocate a sectoral approach to ensure that employers in the worst-affected sectors are not expected to make employee contributions until October.
- In terms of the government loan schemes, I worry about the SMEs that want more than £50,000 in liquidity. The CBILS scheme was meant to be freed up by the bounce back loans scheme. However, CLBILS is just too slow and bound up in bureaucracy.
- The CLBILS comes with many levels of complexity. For example, to be eligible to get the loan, you must prove it is the largest loan you have. Therefore, if you have a larger loan, you must renegotiate it before you can get the CLBILS loan.
- France and Germany took around 10 days to implement the distribution of their loan schemes and three months on, we are still ironing out the gaps in ours. The French government have announced a €15bn package for the aviation industry. I would like to see that kind of ambition from the UK government in relation to our manufacturers.
- On demand stimulations, other countries are taking steps now, be that through VAT cuts or vehicle scrappage schemes. We need to focus on this as well.
- As we recover, there will be a huge debt overhang around the economy and businesses will – to some extent – have to foot the bill.
- Ed, what would you like to see the government do now?
- We need to sort out the loan scheme and bring in sectoral flexibility in the furlough scheme.
- We also need a massive jobs plan. We have millions on furlough – and some will be going back to work, and some won’t.
- We face the biggest unemployment crisis this country has seen in generations. The government must produce action commensurate with the scale of the problem.
- Under the last Labour government, we had the Future Jobs Fund – where the government paid the wages of young people for six months to any business that took them. The net cost of that was £300 million but it put 100,000 young people to work. We’re going to need something much bigger than that.
- Then there’s the long-term issue that the UK is one of the most unequal countries in Europe regionally. And in manufacturing, lots of jobs are concentrated on particular regions.
- Former US President Roosevelt put three million people to work, planting trees, building airports and infrastructure etc. I think we will need that kind of model of putting people back to work on a big scale.
- Ed, what support would Labour provide to manufacturing industry so they can set targets on decarbonisation that are suited to their sector?
- We must give support to industries that face challenges to go green. Aerospace and steel are two sectors that want to go green, and they are asking for support on this.
- Government cannot say to business that they must do it on their own. But businesses need some latitude to negotiate their own pathway.
- Public private partnerships will be key to this.
- Ed and Josh, to what extent do you see investment in green infrastructure as being essential to the recovery?
- Ed: I think green infrastructure is very important to coming out of this crisis. I’d like to see the government investing in carbon capture storage and broadband, among other things.
- We should have general action targeted to the areas that need it the most – so we could start in the regions facing the biggest difficulty.
- Josh: Our members have shown huge appetite for a business road to net zero. But during this crisis, flexibility within a framework is key – with government setting the parameters that businesses operate within.
- Ed, what is Labour’s position on the Brexit negotiations?
- The government has said they will get a deal by the end of this year without extending the timetable.
- The PM has a mandate to negotiate his deal. We see our job as holding the government to account for that. That is their plan, that is what they have promised.
- We want a deal that will help business and not make a bad situation worse.
- We haven’t called for an extension, because the government told us they can get a deal. They have to do it. We want to be a constructive opposition. Having endless arguments on Brexit hasn’t served the country well in the last few years and it certainly won’t now.
- The last thing people need is no deal, particularly in this context, so the Government has to deliver on their promise.