Trade Association Update: October 2021

The topic of rising wages is certainly something that appeals to leading politicians at both ends of the political spectrum, who have been using their party conferences to bang the drum for evolving the UK into a high-wage society.

That is an idea we can all get on board with. However, to deliver it, we need to get the sequencing right. A high wage economy must be the destination of the UK’s post-pandemic recovery, not the starting point. Simply raising wages to combat labour shortages impacting supply chains right now will not solve the problem – in fact, it is far more likely to trigger price rises just when people can least afford them.

That is why a long-term strategy is essential – and urgent – and why this is such a crucial moment in our recovery

The optimism of August has made way for dampened spirits in autumn. The bounce back has been put on hold. As the demand switch has been suddenly flicked on, supply has struggled to keep pace, creating headaches around rising prices, skills shortages, and material scarcity. UK firms which were eyeing growth and planning investment just a few short weeks ago are once again coping, not growing.

In that context, there were certainly a few raised eyebrows in the business world when the government seemed to suggest that these issues could be overcome if businesses were simply willing to pay workers more.

But step back, take out the politics, and businesses do see higher wages as part of a wider vision for a high skill, high investment, and high productivity economy.

Boris Johnson and Sir Keir Starmer agreed on that at least. And it is exactly what has been outlined in the CBI’s economic strategy, Seize the Moment – formed in consultation with hundreds of associations and firms, and one on which we continue to have productive conversations with politicians of all stripes.

Fundamentally though, we need higher productivity

Without that boost, the higher wages we want become unaffordable. If wages go up, and skills and investment do not, we just create a recipe for higher prices and living costs.

Partnership is key to solving the equation. Government and business working together to deliver rapid, evidence-based solutions to the economic challenges we face now, and in the long-term. To do that, we proposed creating a ‘COBR-level’ Government & Business Taskforce with the political clout to tackle challenges head on.

The government’s subsequent creation of the Supply Chain Advisory Group, headed by Sir David Lewis, is step in the right direction, and one that shows the government is listening to the concerns of business. The onus is now on us to work closely with Sir David’s team to provide the insight and expertise they need to deliver effective solutions.

But there is also more to do - we cannot adequately resolve supply chain issues without building a better, more demand-led skills system

With industry ready to make big, long-term bets on areas like digital and decarbonisation, they need a consistent stream of talent to fill the roles of the future. At the moment, there is a bit of a disconnect between supply and demand.

While government obviously has a role to play in resolving that mismatch, businesses must play their part too. With 90% of the current workforce expected to need some form of retraining in the next decade, business has to step up to the plate on upskilling and retraining.

We also need to work the investment side of the ledger. We urgently need an investment step change in Britain and the Chancellor has a chance to unlock this later in the month. The capital investment deduction, announced in March, was a big positive, and business will be looking for him to continue drawing from that playbook in the weeks ahead.

With a spending review imminent, a global investment summit on the horizon and world leaders gathering in Glasgow for COP26, the next few weeks will not just be crucial for our economic recovery, they will show the world how post-Brexit Britain approaches the challenges on its doorstep and beyond.

The path to economic success lies in long-term thinking

By using all levers at our disposal to boost productivity, attract investment and upskill our workforce, we can deliver a sustainable recovery that delivers growth, keeps us competitive and, ultimately, puts more pounds in people’s pockets. Now that sounds like a plan we can all support.

TA Economic Policy Planning virtual meeting

Following on from our Economic Policy Planning session we held at the start of the year, in this session we discussed the upcoming autumn fiscal events and our joint Autumn Budget and Comprehensive Spending Review (CSR) submission.

The CBI is calling for:

1. Delivering smart taxation that rewards investment
2. Accelerate the creation of new skills for new markets
3. Fast-track catalytic public investment to underpin private sector investment
4. Ignite government as the market maker

To read our full Budget and CSR submission please click here.

Over the coming weeks, the CBI will continue to feed in key recommendations to HM Treasury ahead of the Budget and CSR, having also discussed recommendations at the party conferences.

For any questions on the CBI’s Budget and CSR submission, please contact Katy Recina, Principal Policy Adviser for Economic Policy.

CBI at the party conferences

Tony Danker was joined by Torsten Bell (Resolution Foundation) and Sonia Khan (Cicero/AMO) for a session on the Labour and Conservative Party Conferences.

Watch our webinar for a complete rundown of a busy fortnight in Brighton and what this means for UK business.

Useful resources

Both these hubs are accessible on our public site, so do feel free to signpost them to your members:

• The CBI's Coronavirus Hub has all the information regarding COVID-19, including advice, guidance, and what your business can do to help.
• The CBI's UK Transition Hub has the most up to date developments regarding the UK-EU Trade and Cooperation Agreement (TCA) and provides guidance on specific issues.

Have you had any changes in your team?

We are keen to hear your news about staffing changes so that we can update how we communicate with you accordingly. Please let myself or Talisha know.

Access to My CBI is also open to any staff member in your organisation. With a wealth of resources and access to informative webinars do let your team know to use this valuable resource and check which opportunities and policy publications you can access.