The CBI boss on why political risk is now the biggest threat to business

John Cridland tells Allister Heath and Elizabeth Fournier that investors are beginning to worry about the UK

AFTER more than two decades spent inhabiting the CBI’s offices in Centre Point, the shockingly ugly high-rise just off Tottenham Court Road, John Cridland is on the move.

When not kept busy preparing his submission to the chancellor ahead of the Autumn Statement, Cridland is hunting for a new, more modern office for his 150-odd staff, who have been housed above what is now the gaping hole of the Crossrail works since 1982.
But first, the group’s director-general has more pressing matters to think about. On Monday, around 1,000 delegates will descend on a conference centre in west London for the group’s annual gathering. The list of speakers, as ever, is stellar: everyone from shadow chancellor Ed Balls to BT Sport presenter Jake Humphrey and London Stock Exchange Group chief executive Xavier Rolet will be delivering their thoughts on the state of British business.

Cridland – who, after 25 years at the CBI, has seen more economic ups and downs than most – is feeling upbeat.

“I’m looking forward with confidence at a pretty well balanced and sustainable recovery,” he says.

“It’s not going to be spectacular, and I’m quite pleased it’s not – we’ve had a lot of spectacular since 2008. This time slow and steady will serve us well.”

It’s an outlook that he expects Monday’s delegates will share. “I’d be hugely surprised if they aren’t more upbeat than last year, with a real sense of dynamism and appetite just to get up and get on with it.

“I genuinely feel that we’re rebalancing away from debt-driven consumption – both household and state – to an economic model that has its legs more based in trade and investment. It’s going to take a long time but it’s starting to happen.”

But – and there’s always a but – risks still loom on the horizon. These days, however, the issues that keep many business leaders are up at night are political, not macroeconomic.

“Business risks are declining – there’s a better external environment in which people are making investment decisions – but [businesses] are more concerned about the political risks,” Cridland explains.

“That’s hardly surprising at this point in the cycle ... but businesses have to speak up on the issues that bother them between now and the election, and that is the CBI’s mission.”

He believes there are a number of issues where he can help forge a cross-party consensus so that businesses know what to expect after the election in 2015, regardless of who seizes the keys to 10 Downing Street.

“Education is deeply political but skills ... don’t we all just want more, better quality apprenticeships? I want to get these things rooted so that businesses know that no matter who wins it isn’t going to turn over.”

In the meantime, there’s a lot of what Cridland repeatedly calls “scratching of heads” going on, as business leaders begin to worry about some of the rhetoric emanating from the Labour party as well as the coalition in policy areas including energy, price-fixing, tax, migration and many others.

Though he insists it is too early to say whether uncertainty is having an effect on foreign investment, he admits that international firms are starting to ask questions. “I’ve had lots of calls from UK CEOs of foreign-owned multinationals who say their boss has been on the phone asking exactly what the government means when it tells big firms to ‘wake up and smell the coffee’ on corporate taxation.

“That doesn’t mean the ultimate owner on the west coast of the US or in the Middle East is going to stop an investment in the UK ... but I do think politicians are sending mixed messages, which is why political risk is looming large.”

Particularly worrying, he says, is the growing sense that the Labour party wants to be seen to be speaking for small companies, while accusing the coalition of speaking for large companies – setting big and large firms against one another.

“I had 400 SMEs at a dinner in Gateshead recently, and most of the people in that room were in integrated supply chains – their prosperity depended on Nissan being successful; on Procter & Gamble; on the chemical complex on Teesside.

“They didn’t see themselves as being in a different camp from large companies. Don’t split the business community – it is looking for reassurances.”

This divide between big and small clearly informs a lot Cridland’s thinking, and he says businesses can learn a lot from treating individuals as consumers rather than citizens.

“At focus groups you speak to [people] as citizens, and expect them to have views about fat cat bonuses or trading or work standards in Pakistan – and they do have views ... but they don’t respond as citizens, they respond as consumers. Where they really get antsy is when you talk about how they’ve been treated or their how families have been treated in the situation they’re describing.”

It’s a model that supermarkets have long understood, but that other corporations can struggle with – pouring man hours into corporate social responsibility programmes while neglecting the most obvious place to start if they want to improve reputations: “Just doing what [they] do very, very well”.

Inevitably, two of the biggest issues hanging over businesses are also the two biggest headline grabbers: energy prices and corporate taxation.

On the latter, Cridland is clear that transparency is the only way to reassure the public that a firm is doing things for the right reasons – but understands why companies are reluctant to play ball. “The lesson we’ve learned is that you can’t stand on ceremony. You can interrogate the annual accounts and it’s all there, but it’s not accessible.”

One solution, he suggests, is to encourage firms to produce an A4 page of narrative to explain exactly what it’s paying and why, hoping that if a company tells a story about its tax affairs some of the pressure will evaporate.

“People just want to know why, if the tax rate is 23 per cent, the company only paid five per cent – is it because they’re investing, have they made losses, is it because they’re part of an international group and they’re paying the taxes somewhere else? But lots of companies say it takes two to tango – if we’re abiding by the law and by what HMRC is doing, then don’t beat us up.”

The energy question is more complex. While debate rages over household bills, businesses are also feeling the heat. Cridland cites the carbon floor tax – introduced earlier this year at an initial £4.94 per tonne of carbon dioxide produced – as a particularly anti-competitive hit to energy-intensive British manufacturing firms.

It’s one of the main issues he’s planning to bring up in his submission to the chancellor ahead of the Autumn Statement, along with a call to review the annual rise in business rates, which he says is being raised as a problem by car manufacturers almost as much as it is by retailers.

But while Cridland insists that the CBI’s members are largely on board with the environmental agenda, he believes that some important changes are nevertheless needed.

“Policy tools to deliver green growth need to be cute and clever, and too often they are blunt and simplistic, so that’s the real challenge,” he says. “And sometimes green taxation is used as an excuse for stealth taxation – it’s a mistake for the Treasury to do that.”

CV JOHN CRIDLAND

Education:
Educated at Boston Grammar School and has an MA in History from Christ’s College Cambridge.

Career:
1982: Joined the CBI as a policy adviser 1991: Became youngest ever director at the CBI, in its environmental affairs division
2000-10: Deputy director-general from
2010-present: Director-general of the CBI

Other roles:
Served on the Low Pay Commission from 1997 until 2007; was vice chair of the National Learning and Skills Council between 2007-2010; awarded a CBE for services to business in 2006 and an honorary doctorate from the University of Lincoln in 2011; is a board member of commissioner for employment and skills.

Family:
Married with two teenage children; lives in Bedfordshire.