The CBI’s economic diagnosis: welcome optimism, too much collaboration, not enough competition

Being the voice of business is hard. There are six million in the UK, and even if you count only those employing 10 or more people, more than a quarter of a million. Apart from preferring lower taxes to higher, you should not expect them to be unanimous on anything – in fact, it would be a little suspicious if they were. Rather than singing in unison, business is meant to be fighting it out in the market, cacophonously.

The Confederation of British Industry (CBI) therefore deserves marks for audacity whenever it publishes a paper setting out what business needs. Last week, this quality was evident in “Seize the moment: How can business transform the economy?”, a 70-page document that argued, inter alia, for there being £700bn of opportunities waiting to be seized by 2030. To call this number dazzling would be an understatement: £700bn is around a third of GDP, which would normally take 20 years to find. Taken as extra growth above the baseline, this implies a UK that transforms itself from an economy growing like it is in Japan, circa 2010, into one that is growing like Japan, circa 1960.

The optimism is still more dazzling when set against the gloom evinced quite recently ^[1] by the CBI about the risks of a bad Brexit; now, here in black and white, we read that “there are huge opportunities for the UK .... for the first time in 40 years, the UK now has more control over our trade, immigration, and investment policy, alongside sector and market regulation”.

The CBI language show a determination to get in tune with the Johnson administration

Perhaps the key sentences in the whole document are these: “The CBI will change too. We will seize the moment to play a far more proactive role in transforming the economy”. Under new director general Tony Danker this is clearly an organisation determined to show that it is wholly in tune with the bumptious, can-do optimism of the Johnson administration. Without aping the exact language, the CBI’s big priorities are very like those of the government: net zero, scientific leadership, exporting excellence, levelling up, inclusive growth and health. Reading between the lines, there is a new strategic goal for the CBI: to avoid ever again being the target for Anglo-Saxon phrase-making ^[2] by the prime minister.

Can-do is admirable; how-do is where the real value is to be found. Like the government’s Plan for Growth ^[3], “Seize the Moment” is challenged by the nature of what it sets out to do: describe in broad terms how millions of UK businesses, made up of dozens of sectors employing some 33 million people, are going to grow. Most pure economists would baulk at even asking the question, let alone answering it. Economies are inherently protean and unplannable. The growth that comes results from continuous sifting and sorting of techniques, investments, jobs, market ideas and innovations, and most of it happens far away from the plan of any government or business organisation. The parts that government does control – certain infrastructure, public goods like education or R&D spending, or big decisions like the macro-economic stance – are where the most attention is paid. But important as they are, these are slow-moving areas of policy that do not tend to generate a moment-seizing jolt of immediate effect. Insofar as governments transform their economies – working with informed organisations like the CBI – it is usually a glacial process of institution building.

Therefore, it is inaccurate and probably unfair to judge the CBI’s document as a kind of blueprint for how to kick the UK up onto a higher growth plane. Instead, I see it in two ways: as a statement of where the problems in the economy are to be found, and an expression of the method the CBI thinks should be applied to solving them. On the first, the document is sound, and worth re-reading. Productivity is weak, growth is overly weighted towards parts of the economy, and investment has been too low. In contrast to the more tech-obsessed government, the CBI does not think growth policy can get away with thinking only about the high-value, innovation-centred industries that appear more amenable to industrial strategy. “Foundational” sectors – those that employ millions, and matter both in their own right and in how they serve the rest of the economy – need to have their productivity taken seriously, too. This is particularly important in light of how many of these service sectors are those most directly damaged by the covid-19 pandemic, and likely to face the most change in the years ahead.

The CBI blueprint emphasises collaboration but barely mentions competition

The method the CBI means to deploy to fix Britain’s economic ills can be summarised in a single word: collaborate. Throughout “Seize the moment” it is made clear that business, government and society is meant to be working together to fix problems, through “a deep-rooted and reimagined partnership between business and government”. The document is full of taskforces and commissions, partnerships and coalitions that share a commitment to some goal or other: levelling up, sharing best practice, building clusters. Big companies are urged to take in hand the small, and naturally all are urged to work with the government. There is even an heartfelt quote decrying the idea that the success of one company needs to imply the failure of another: “We all lose when our business model is founded in another’s pain”.

Tell that to the online retailer, grabbing business off the high-street, or the food delivery company, accurately divining how consumers want fresh produce sent straight to their front-door, or the windfarm developer, driving prices ever lower. Almost entirely missing from “Seize the Moment” is any mention of competition, the electric force of market economics – the word can be found just twice in the document, compared to over 30 mentions of collaboration in some form. Perhaps it is taken for granted: competing is what businesses do naturally, whereas it takes a special effort (and the ministrations of bodies like the CBI) to bring companies together where there are shared challenges to discuss and find solutions to. But my concern – echoing those already documented about the government’s Sector Deal policy ^[4] – is the creep towards policymakers seeing collaboration as the norm, competition as the exception, and not the other way round.

Harping on about Brexit (which the CBI wisely refuses to do), I think it is important to remember that a key motivation for entering the European Economic Community was to increase competitive pressure upon corporate Britain – and the loss of that pressure from the diminution of our markets could be one of the big costs of leaving in the manner we have. The CBI and the government see the challenge of growth as a big, shared national endeavour. Having been in the trenches against one another for much of the time since the EU referendum, it is understandable that the CBI wants a reset, and this loud shout of optimism is a good way of re-gaining a hearing. But a healthy environment for growth may in time require the business voice to be more challenging, leave the safe space of collaborations and shared commissions, and speak up for some of the tougher virtues of capitalism.

1. Our response to the new UK-EU agreement | CBI
2. Boris Johnson challenged over Brexit business 'expletive' - BBC News
3. Build Back Better - our plan for growth (publishing.service.gov.uk)
4. How to design a successful industrial strategy | The Institute for Government