The UK’s top business groups are scrambling onto an election footing and preparing to lay out their manifesto demands as the Labour and Conservative election machines kick into gear.
July’s surprise poll will cap off a years-long charm offensive from business towards the Labour party in particular, which has reopened its channels of communication after a frosty few years of relations under Jeremy Corbyn.
While lobby groups have been intensively rolling the turf with both parties over the past few months, scores have been caught off guard by the snap election and are now hurriedly finalising their internal manifestos to publish next week.
“All the intensive meetings have been done by this point, now it’s a case of hoping that the message has landed,” Andy Donald, comms chief at UK Finance, tells City A.M.
The CityUK, UKFinance and the British Chambers of Commerce have all been forced to bring forward their manifesto publications to next week in the hope of swaying the direction of the electoral platforms of both parties.
But what does the City and big business actually want from a new government?
City A.M. takes a look at what business groups and major companies will be looking for in both parties’ manifestos.
A tax roadmap for City and business
Among the chief fears still gripping the City in particular is whether it will ultimately be squeezed as a cash cow to fund a new government’s spending plans.
In its manifesto next week, UK Finance will ask for a clear direction on tax policy towards UK financial services. Labour has committed to holding corporation tax at its current rate of 25 per cent during the next parliament in a bid to offer businesses greater certainty.
The Conservative party has hiked the rate to 25 per cent but will be keen to show it’s on the side of commerce and looking to keep the corporate tax rate low.
The City has also been clamouring for a cut to stamp duty on share trading and any sign of movement from either party could be a way of winning votes.
New Deal for workers or bum deal for firms?
Labour has unsettled areas of the City with its sweeping plans to overhaul workers rights. While few City lobby groups have addressed the plans directly in their manifesto calls, big firms will be looking for clarity on how serious the changes will be after signs the measures may be watered down.
The Financial Times reported earlier this month that a new draft of the measures had weakened the language on fire and rehire – essentially sacking workers and hiring them back on less favourable terms.
The paper reported that it contained a line about the importance of allowing businesses to “restructure to remain viable and preserve their workforce when there is genuinely no alternative”.
Zero hours contracts are also now unlikely to face a complete ban because some people opt to have them. However, workers will be given rights to a contract reflecting their usual work pattern.
Under the original plans, workers would also be given full rights from day one. Big business and City firms will be keen for clarity on the plans going into the election.
The future of City reform
The government has been pushing through a major package of City reform over the past two years but many of the flagship changes have been cast into doubt by the move to call an early election.
Treasury sources confirmed this week that the government has already shelved the much-touted retail sale of its stake in Natwest, which had been talked up as a moment to revitalise retail investment in the UK.
After the Chancellor Jeremy Hunt announced plans for a British ISA in his March budget, the Treasury launched a consultation to run until the 6th June. However, any response to the consultation will now be delayed until after the election.
Labour has so far remained quiet on the plans and it is unclear whether the party will back the reforms if elected to power. Labour did not respond to multiple requests for comment.
Among the other measures now shrouded in uncertainty are the so-called Pisces market, a new hybrid public-private stock exchange designed to allow companies to sell their shares in a style akin to a public market.
Clarity on City reform will be key to winning round the confidence of the Square Mile.
Boosting access to talent
Talent troubles have plagued business in recent years and lobby groups have called for a more front-footed approach to both bringing in international talent and boosting the flow of talent domestically.
Data from the OECD estimates that the lack of basic numeracy skills costs the UK economy £25bn a year, and both UK Finance and fintech body Innovate Finance have made financial education a key pillar of their pitches.
City firms and the fintech sector will also be keen for clarity on immigration policy after the Tory party has ramped up the barriers to workers coming into the UK.
To be eligible for a skilled worker visa to come to the UK, a job offer must meet a minimum salary requirement of £38,700 per year as of this Spring.
Relationship with the EU
Risi Sunak has soothed ties with the EU since taking office but Brexit has proved a drag on the economy and has hampered many firms ability to do business internationally. New checks on food imports from the bloc represent a latest hurdle for businesses and have drawn the ire of the likes of the British Chambers of Commerce
Starmer has promised to improve the relationship from 2025 when the UK-EU partnership deal will be reviewed, but he says he will not take Britain back into the bloc’s single market or a customs union.
Businesses and City firms will be looking for clarity on what a future relationship with the EU will look like under both parties.
EU and UK flags. Almost a decade after the vote, lots of disentanglement still hasn’t properly taken place
Strong and stable?
Business will ultimately want to see a sense of stability after a turbulent eight years for British politics that has unsettled the business environment.
Starmer has stressed how volatile British politics has become since Brexit with five Conservative prime ministers occupying Downing Street in eight years.
The upheaval has contributed to low levels of business investment, and the prospect of greater stability under a Labour government – especially if it wins the big majority in parliament that polls suggest it will – could help to reduce nervousness among investors.
The Tory party meanwhile will be mounting its election pitch to business on the potential of improving economic fortunes and a sense of “better the devil you know”. Ultimately, business’s demands of both sides will be underpinned by a call for a more stable political environment.
Clarity on Carry
While the tax treatment of carried interest might be a minor issue in the wider campaign, it could be a dividing line for one lucrative portion of the City.
Carried interest, or ‘carry’, is one of the primary ways that private equity bosses make money. It allows private capital managers to pocket a share of the profits of asset sales while paying a tax rate of 28 per cent, higher than most capital gains tax which is at 20 per cent.
Labour, however, is threatening to ramp up the tax rate on carry to as high as 45 per cent, in line with the higher level of income tax.
In its manifesto, the British Venture Capital and Private Equity Association has demanded a rethink
“The treatment of carried interest in the tax system needs to continue to reflect the risk investors take when making long-term capital investments without guaranteed returns,” the BVCA has said.