Investors ‘shunning UK’ as economy weakens
One of Britain’s business leaders has warned that global investors are avoiding the UK because the government is failing to get a grip on the weakening economy.
CBI boss Tony Danker wants Downing Street to call “Cobra-style meetings” to address inflation and weakening business confidence.
Mr Danker told a media briefing ahead of releasing today’s forecasts for the economy that a “technical recession” can be avoided if corrective action is taken urgently.
The director general of the business group said ministers need to stop spending time on less important matters such as bringing back imperial weights and measures and devote their attention to key issues.
He said firms’ plans for investment were in “pause mode” as they worried over the lack of focus on growth and inflation amid wrangling over Prime Minister Boris Johnson’s political future.
The CBI has downgraded its GDP growth outlook significantly, to 3.7% in 2022 (from 5.1% previously) and 1% in 2023 (from 3.0% previously).
“I do not think the government is stepping up its level of engagement on the economic challenge,” he said, adding that would like to see the Prime Minister and the Chancellor co-chair weekly Cobra-style meetings and address the economy with the urgency they applied to dealing with Covid.
The Organisation for Economic Co-operation and Development (OECD) last week predicted that the UK would be the worst-performing G20 economy after Russia next year owing to its unique cocktail of soaring inflation, higher interest rates and rising taxes.
The pound is close to a two-year low against the dollar as traders bet that the outlook will darken over the winter, with the average household energy bill expected to jump by £800 to £2,800 in October.
Mr Johnson said in a speech on Thursday that boosting Britain’s growth rate was his top priority. Rishi Sunak, the Chancellor, has pledged to cut business taxes in the autumn.
But the CBI is forecasting a recession in household consumption, which it says will turn negative in the fourth quarter of this year and not return to growth until 12 months later. Mr Danker said that if business confidence fell any further that could lead to a whole-economy recession.
He said: “We are seeing global companies saying the UK is not the place to invest right now.
“The entire economic strategy right now should be focused on changing confidence, and I don’t think you can wait until the November budget to do that — I think it’ll be too late by then.”
He said labour shortages were the main cause for concern among business leaders he meets on a weekly basis.
The CBI is demanding a permanent extension to Mr Sunak’s “super-deduction” tax break for business investment and a cut in the approval time for offshore wind farms.
It also wants a resolution of the Northern Ireland protocol, a deal with transport unions to avoid a wave of summer strikes and a replacement for the post-Covid Recovery Loan Scheme.
The organisation is calling for updates to the shortage occupations list to help bring in more workers from overseas and says a one-year break should allow employers divert apprenticeship levy funds into tackling labour problems.
Mr Danker believes the EU is being inflexible over the Northern Ireland protocol but says the UK should not act unilaterally as that would see the problem escalate into “all kinds of trade disputes”.
He said the government need to reassure investors that departments were working together and that the economy was under strong leadership.
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