Director General’s reflections on the new government: an open letter to members

Dear members,

For the first time in nearly 50 years, the UK is outside the EU. As the government prepares for this new chapter in British history, I wanted to share a few reflections from our recent work and conversations, both here and in Brussels and Washington.  

The good news is that there’s unquestionably a renewed sense of economic optimism on the back of the general election. This is coming through in my conversations with members and in the CBI’s surveys. We have a government with a strong mandate and broadly pro-enterprise agenda, with the space to think and act for the long-term. The CBI’s main message in all our engagements with ministers and officials is that there’s an opportunity now to turn this optimism into new investment through the right action, taken in partnership with business.  

Phase 2 begins – mandates for the negotiation published 

Inevitably, a good deal of CBI attention remains on Brexit. Two weeks ago, I was in Brussels with BusinessEurope, seeing EU Trade Commissioner Phil Hogan and Head of the European Council’s Brexit taskforce, Didier Seeuws. Both meetings offered welcome signals about the need to move beyond the dogmatic approach that characterised phase one of the negotiations and an appreciation that red lines don’t help deliver solutions. But there was a clear message that a zero-tariff, zero-quota deal comes with obligations, namely around the level playing field. While talk of a Singapore-on-Thames model is rarely discussed here in the UK, in Brussels it’s much more front and centre then we might imagine. They want a close relationship with the UK, but not without safeguards for the EU Single Market.      

Last week saw the informal beginning of the trade discussions, with both sides publishing their negotiating mandates. With the negotiations set to begin at the start of March, the coming weeks could be choppy for business. Ministers have privately warned us to expect plenty of ‘incoming fire’ as both sides adopt tough negotiating positions. As our President John Allan, who was at the PM’s speech last Monday, said – the challenge is to make sure business doesn’t get caught in the crossfire.   

Read the CBI’s reaction to the PM’s speech  

The CBI is well-placed to make sure that this trade negotiation doesn’t become a zero-sum game focused on winners and losers. Instead, the message I will deliver in meetings scheduled with Michael Gove and David Frost, and in further engagements with negotiators in the EU,  is an open offer to provide the insight and evidence from business to support an ambitious trade agreement that works for both economies. 

Read the CBI’s analysis on what the negotiating mandates mean for business 

Global Britain – beyond Brexit 

Away from Brexit, last week I was in Washington as part of the business ‘B7’ group meeting ahead of June’s G7 at Camp David. Alongside this programme, I also met US Senator Chuck Grassley, Deputy US Trade Representative Jeffrey Gerrish and Chair of the President’s National Economic Council, Larry Kudlow, to discuss UK-US economic relations and the prospects for a US trade deal, and took the opportunity to deliver a speech on US/UK trade, urging both sides to aim high in seeking global standards in industries of the future like AI and autonomous vehicles. 

Read my speech to the Atlantic Council on the UK/US trade deal 

Those of you who spend time in the US won’t be surprised to hear that my two main observations – often bipartisan – were around US attitudes to China and the Digital Services Tax (DST).  

On the former, while there’s disagreement on tactics, a political consensus exists for talking and acting tough on China. This is as much about global political leadership, values and technology as it is about trade. Last week’s decision by the UK government on Huawei represented the first real signal of how the Prime Minister intends to approach China. Reflecting on my discussions in Washington, it’s clear that there’s more work to do on ‘the China question’ with the US and what it means for the transatlantic relationship. 

On DST, it was made clear to us that UK government’s planned implementation in April risks retaliation and the US administration will continue to put significant pressure on behind the scenes for cancellation or delay.  

Decade of delivery – an offer of partnership 

Perhaps what has encouraged me most back at home is the renewed emphasis on the domestic agenda. This is something the CBI has repeatedly called for, and I’ve felt a real appetite from the new government to work in partnership with business to tackle the major economic challenges that will shape the next decade. 

I’ve had several meetings with Andrea Leadsom and outlined an open offer on three areas where the CBI is particularly keen to work with government; net zero, the skills agenda, and trade deals. On net zero, government has set the 2050 target, business can help develop the plan to deliver this. We’ll be discussing this in more detail with COP 26 CEO Peter Hill this week.  On skills, we know that nine in 10 people will need to reskill over the next 10 years. There is a huge opportunity for the UK to lead the way on tackling this challenge if business and government work together. And finally, on trade, where we have discussed CBI proposals for a world leading business engagement framework with the Prime Minister’s business team at No.10. 

Early signs of progress 

There are also some encouraging early signs of progress.  

Chris Skidmore, the Science Minister, has committed to increasing R&D investment across the UK in line with CBI catapult quarters recommendation, with UKRI committing to work with business to shape the future direction of how research and innovation funding is administered. Alongside this, the CBI has been working closely with officials in BEIS to help translate Conservative manifesto commitments on flexible working into policies that reflect business’ priorities. And across government departments, we’ve been keeping up the pressure on government to proceed with building the HS2 rail project which is fundamental to the government’s ‘levelling-up’ agenda.   

Next month’s Budget offers the opportunity for the government to build on this progress and generate momentum in the economy. And this week the CBI has published its submission ahead of the Chancellor’s statement, setting out business’ priorities to build the confidence that will trigger investment across the UK. Rain Newton-Smith, our Chief Economist, and I will be meeting the Chancellor Sajid Javid to discuss our submission next week.  

Read more about the CBI’s priorities for next month’s Budget 

As ever, please do keep letting us know your thoughts – on our messages to government, our policy work, and, most of all, how we can best support you and your business at this vital time.  

All best wishes,

Carolyn