Wooing business: will it work?

This is an audio transcript of the Politics Fix podcast episode: Wooing business: will it work?

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George Parker
Boris Johnson famously told business to “F off!” But this week, Prime Minister Rishi Sunak was a little more conciliatory.

Rishi Sunak
This government is unashamedly pro-business. It’s as simple as that.

George Parker
Welcome to the Political Fix, your essential insider guide to Westminster from the Financial Times with me, George Parker. Coming up, Rishi Sunak is hoping to win back support in the business community, even as Labour conducts what it doesn’t like to call a “prawn cocktail offensive” — an attempt to woo the financial community with a series of breakfast lunches and dinners. The FT’s markets editor Katie Martin and deputy political editor Jim Pickard are on hand to look at the Labour and Tory recipes. Plus, we’ll look ahead to next week’s local elections, what to expect. I’ve been out and about in Lincolnshire and will be comparing notes with the FT’s political correspondent Jasmine Cameron-Chileshe, who’s been out on the main streets of Surrey, with analysis from our columnist Robert Shrimsley. Thank you all for joining.

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George Parker
It was back in 1992 when the then environment secretary, Michael Heseltine, launched a scornful attack on the Labour party’s attempts to win support among the business community. Labour ministers have been wining and dining leaders in the City. Mr Heseltine bemoaned the prawn cocktails that have been eaten. Never, he said, have so many crustaceans died in vain. Well, this week both parties were at it again. Rishi Sunak launched a major new effort to reconnect the Tories with UK plc at an event called Business Connect. And Labour’s shadow chancellor Rachel Reeves will next month up the ante to be the party of business when she travels to New York to meet big investors in the UK. So which side is winning? With me are the FT’s Katie Martin and Jim Pickard. So Jim, what was the point of Rishi Sunak’s bringing together 250 odd footsie bosses, C-suite people, all the rest of it?

Jim Pickard
So Rishi Sunak feels on the back foot in terms of government relations with business for several reasons. Firstly, of course we have Brexit, which most business leaders in general were opposed to with the dislocation at the border that has happened since then. Then we’ve had the political chaos which has sent out a signal to global investors that this is probably not the kind of most reliable place to invest in with changes of prime minister, changes of business secretaries and all of that that happened under Boris Johnson and Liz Truss. And he just wants to say, you know, we are now entering a period of managerial, stable political governance where actually we can listen to and do long-term planning. And yes, we did pull up corporation tax, but that was only because we had to pay for the Covid pandemic. Other than that, we are basically very pro-business and we’re really sorry that Boris Johnson used the F-word about you all. (George laughs)

George Parker
So how did it go?

Jim Pickard
As well as these events go. They tend to get flagged up in advance, and then they’re basically just a load of people in suits schmoozing in the conference centre and they’re not that exciting in and of themselves. It’s all about the message they send out. And of course, Labour has been breathing down the Conservative party’s neck on this particular issue ever since Keir Starmer became leader and ever since Rachel Reeves became shadow chancellor because they have made it one of their missions to go out there and proactively woo business, tell them that they pose no threat to the business world. And for the Labour party, it’s all about basically drawing a line under the Jeremy Corbyn anti-business era.

George Parker
OK, we’ll, come on to Labour in a minute. I mean, I heard that people said it was generally a positive reception that Sunak got. He took quite a few questions over an hour, took some quite difficult questions actually, didn’t he, about the government should scrap the tax on shopping by overseas visitors . . .

Jim Pickard
Yeah.

George Parker
 . . . So he took some tough questions.

Jim Pickard
But business leaders never sort of throw eggs and rotten tomatoes at visiting political dignitaries. They’re always quite a polite occasion, aren’t they?

George Parker
That’s probably true. So Katie, how much is Sunak having to battle the headwinds created by the Boris Johnson and Liz Truss era?

Katie Martin
Yeah, I think there’s still a certain amount of unpacking of that that the Tory party is having to do right now. You know, investors that I speak to and bankers that I speak to are just, every day, they wake up and, you know, praise the skies for the fact that we don’t have that kind of utterly chaotic management of the economy that we had a certain period around six months ago. We cannot go back to that. And investors recognise that the current government is much more stable.

Nonetheless, it’s really striking that generally speaking, even when you’re around, you know, a year, 18 months out from a general election, you start to hear investors saying, well, what would it look like if we had a Labour government? And generally speaking, there’s this kind of weird knee-jerk reaction, which is to say leftwing governments are bad for markets and rightwing governments are good for markets because, you know, leftwing governments tend to throw money around in places they shouldn’t necessarily.

But I’m not picking up any alarm whatsoever over the prospect of a Labour government this time around. Even the more kind of conservative, somewhat more, I’m gonna say reactionary investors that are out there are perfectly comfortable with the idea of a Labour administration. They see Rachel Reeves as a very sensible pair of hands. They think that this is a government that’s not going to rock the boat, it’s not going to go back to where we were with the mini-Budget. So although investors are, broadly speaking, delighted to see that we’ve got much more of a kind of sensible policy framework now than very relaxed about the possibility that this could flip into a whole different party after a very long time.

George Parker
Just on the Tories, first of all. Do you think Rishi Sunak is starting to turn things around or is it just such a big mountain to climb after the last few years of pretty bad relations?

Katie Martin
In terms of rebuilding trust and confidence of investors, a large part of the damage that was done at the time of the mini-Budget has been undone.

George Parker
Mmm.

Katie Martin
You know, that so-called “more on risk premium”, the kind of extra costs of borrowing that was layered on top of all sorts of borrowers and that trickles down to everyone’s mortgages and corporate borrowing and all the rest of it. All of that got more expensive after the mini-Budget just because the gilt market went into meltdown. That has largely been fixed. So it’s largely been parked as an issue. But we all have long memories. We know what happened and what came out of that particular party and those particular internal party dynamics. So it hasn’t quite been forgiven by markets yet, but investors can see that we have got a new broom.

George Parker
And is Brexit still an issue?

Katie Martin
I think it’s safe to say that investors would like it to be acknowledged that it is a drag on growth and that it does, on the margins, feed into inflation, which is a huge problem for the UK economy, even more so than a lot of other G7 economies. I think that investors would like to see a little bit more transparency around that from both sides of the political divide, actually. But again, I don’t think there are very many money managers out there that think that this can be unwound.

George Parker
No. Now Jim, Labour hates it being called a prawn cocktail offensive. What exactly is the 21st century equivalent and what exactly are Labour doing?

Jim Pickard
So they have breakfasts, I think, most Tuesday mornings with various business leaders. They had a big kind of gathering, like a summit, done in Canary Wharf a few months ago. They have a Labour conference. They basically have a whole business day with, you know, loads of events going on. And they are predicting that this year, they’ll be oversubscribed and they will have to turn people away which may or may not be their own PR. But we know that last year they had a bigger turnout of business people than they’d had any time since they were turfed out by the electorate in 2010.

And there is a feeling among a lot of lobbyists and business people that, you know, now is the time to be talking to Labour because they are entering that period of drawing up their manifesto which will go on through the summer. And at some point, it’s a very turgid process. The manifesto will come out at the end. And once the manifesto is written, then you as a business will have basically no chance of influencing what Labour’s policies will be in your field going to the general election. So now is the time where there’s a lot of interest in this. One lobbyist said to me this week that basically business people when they have these events with Labour politicians are like bees around the honeypot.

And I think there’s a really interesting question here about are Labour’s policies going to be pro-business or not pro-business or the rest of it? I think on one level it’s quite a naive approach because, you know, there are certain issues like level of corporation tax which affect most businesses. But there will be some sectors that will lose out from a Labour government. You know, if your business is making coal-fired energy generation, then bad luck. If you run a chain of private schools, then you’re gonna lose your charity status. If you’re in private equity, you’re gonna be taxed in a different way. But if you’re in the business of making components for electric cars or if you’re in the business of wind turbines, these are great industries to be in because they are planning huge subsidies for those industries. So you know, there are gonna be winners and losers. I think what’s important from the kind of wooing by Keir Starmer, Rachel Reeves and let’s not forget Jonathan Reynolds, he’s the shadow business secretary who is also hugely business-friendly and a very affable guy. You know that the mood music is really important politically.

George Parker
And Katie, what are the people you’re speaking to in the City saying about the Labour offer?

Katie Martin
Well, I think what they’re doing is looking over to the experience of the US which has thrown ungodly amounts of money at the green energy transition and said, why don’t we do a bit of this, ’cause this has just absolutely lit a fire under renewable technologies in the States. There are suddenly loads of really innovative companies that want to be there, that want to be building there, that are creating hundreds of thousands of jobs over there. And you know, on the EU side, they’re looking jealously over at the success of the Inflation Reduction Act. But over in the UK, there’s definitely a sense that we could have a bit of that too. And you know, industrial strategy used to be a little bit of a kind of, you know, dirty phrase. There was this idea that government shouldn’t be kind of telling business what to do. But, you can tell us what to do as long as you’re gonna throw some money at us (laughing) at the same time, we’re quite happy with that. So I think that’s the kind of international consensus is that there is a climate emergency, we have to do something about it. And why don’t we turn that into a business opportunity rather than painting it as some sort of threat?

George Parker
And in that respect, the Labour party is pretty much in line with that way of thinking, isn’t it? I mean there’s £28bn a year they plan to spend on green technologies.

Jim Pickard
Yes, a Labour government would be massively more interventionist on this stuff than the Tory government. The main difference with the US is that Labour would actually do it through, partially through state-owned company as well, whereas Joe Biden’s doing it through the private sector.

George Parker
And Katie, what about that you mentioned some of the policies which probably aren’t gonna be so popular with some FT readers (laughing) — the crackdown on non-doms, private equity tax breaks, VAT for tax breaks for private schools going down the pan. Does that really bug people?

Katie Martin
I think what the majority of investors are focused on is, you know, first of all, do no harm. So investors can see that what’s happened to UK productivity just as a result of the huge number of strikes at the moment. And this is something that doesn’t go down well. I think that you know, they are looking for governments that are not too interventionist in the sense of just layering lots and lots of regulation, particularly on top of energy companies that are a big part of the UK stock market. But would markets sell off in the event that private schools lost their charitable status? I can’t see it.

Jim Pickard
Whereas if the Jeremy Corbyn-John McDonnell partnership had won in 2019 with their promise to expropriate £300bn worth of shares and nationalise six industries, I think they could have been some quite exciting heady days in the markets.

George Parker
But how important is it, Jim, do you think, for parties, I mean, particularly the Labour party I suppose, to be able to establish their business credentials? I mean it was, nobody would term a disastrous, but very bad Ed Miliband, for example, back at the 2015 election, that he wasn’t able to bring business with him and people looked at him. He became Labour right out, of course, and all the rest of it.

Jim Pickard
Yeah, I mean, it’s a very complicated one because the corollary of that is that in the EU referendum there were all those lists of business people begging voters to vote to stay in the European Union. The overwhelming majority of serious senior business leaders were Remain, and yet the public totally ignored that. And if anything, it enhanced the sense that the establishment will remain and that the people would leave. And so, you know, it can be a bit of a double-edged sword. Being taken seriously by business is kind of a prerequisite of being a credible prime minister. So I think at some basic level, you need to be taken seriously by business and not have them thinking that you’re scary with radical ideas that could ruin (laughing) everything for national finances and household finances. But beyond that, you probably start to get diminishing returns at some point.

George Parker
And Katie, it’s not that big a mystery is it? Business are fairly promiscuous when it comes to politics, aren’t they?

Katie Martin
Oh yeah.

George Parker
Look at the opinion polls, work out who’s gonna win . . . and face the . . . (laughing) They’re are that party conference, aren’t they?

Katie Martin
Back the horse that’s already several furlongs.

George Parker
Always a good strategy. (Katie laughs)

Jim Pickard
The media would never do that. (Katie and Jim laugh)

Katie Martin
No, quite. But yes, I think, you know, as long as the Labour party can keep throwing off the impression that they’re not going to do anything remotely like either Jeremy Corbyn was proposing or like we saw from the brief Truss government, then I think they’re on reasonably safe ground in terms of keeping that confidence. But again, you know, were a general election go the other way I do think that markets definitely see the Sunak administration as significantly more competent than the one before it. I hate to make predictions about anything . . . 

George Parker
Go on. (George laughs)

Katie Martin
 . . . but I can’t see the next general election being a massive market mover without some sort of radical policy shift from either side.

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George Parker
Katie Martin and Jim Pickard, thanks for joining us. On Thursday, more than 8,000 seats will be contested at 230 councils across England. Mayoral elections are also taking place in Bedford, Leicester, Mansfield and Middlesbrough. With me are the FT’s Jasmine Cameron-Chileshe, who’s been knocking on doors in the so-called Tory blue wall in the South, and our columnist Robert Shrimsley. So Robert, where are these local elections taking place? And of course, crucially, where are they not taking place and how important are they for giving us a picture of the national situation?

Robert Shrimsley
Well, like all local elections, it’s a bit of a patchwork. But primarily these are in England in the non-metropolitan authorities; they’re not in big cities like London, for example. But there are elections there are sometimes only a third of the councils rather than the full council. What’s the significance of this? Well, as with all elections, it’s a better barometer of how the parties are doing than opinion polls, because these are actually people bothering to turn out to vote. Obviously, these are always very low-turnout elections. So it’s the most committed, but it’s quite a useful indicator because the last time these particular elections were held four years ago, both the Labour party and the Conservative party did fairly badly.

George Parker
It’s unusual, isn’t it?

Robert Shrimsley
It is unusual. It was the plague-on-both-your-houses period of the early part of 2019.

George Parker
This was Theresa May in the middle of the Brexit chaos and the . . . 

Robert Shrimsley
And Jeremy Corbyn.

George Parker
Facing a Brexit (inaudible).

Robert Shrimsley
Exactly. So it was a terrible time for the main parties. So both of them, in a sense, ought to be doing better. And yet we’re in this period of massive expectations management where both sides will be trying to play down any possibility of doing well. But I think the key test is, is Labour making progress? Is it maintaining the leads that people think it should be maintaining that point it to government? And equally, is there any kind of Rishi Sunak bounce?

George Parker
Yeah. Now, Jasmine, you’ve been down to Surrey, traditionally a pretty safe Conservative territory. There’s a fascinating contest going on there between the Conservatives and the Lib-Dems, particularly along the A3 corridor. You know, if you look at it stretching out of London, sort of seats like Richmond, Twickenham, Kingston have already gone for the Liberal Democrats. Esher and Walton, the next one along, Dominic Raab’s seat in danger. Then further down into Woking, Guildford, South West, Surrey, places like that. What sort of picture did you pick up down there?

Jasmine Cameron-Chileshe
Well, there’s a lot of Lib Dem activity there at the moment. So since their shock by-election win in Chesham and Amersham, the Lib Dems have been heavily targeting the so-called “blue wall”. In particular, they’re really interested in Surrey because they think they can appeal to namely two types of voter. So you have one voter who was perhaps a more traditional Conservative, but they’ve been turned off by Boris Johnson and Liz Truss. They think they’ve got, you know, an eager audience with this type of voter. And then they also have another type of voter called the “Surrey Shuffler”. So this is the Joules who have moved from London, often to places like Surrey into the commuter belt to get more space. Often they’re used to voting Labour, but they realise that in an area such as the blue wall, it’s often a two-horse race between the Liberal Democrats and the Conservatives. So again, the Liberal Democrats think they have a potentially receptive audience.

And so in terms of some of the messages that we’re hearing, so the Lib Dems are really keen to tap into some of these local issues and broaden them out. So they’re focusing on the running of local NHS services and saying, well, we need to look at what the, you know, the handling of the NHS more broadly by this government. And so they’re using these local issues to tap into a feeling which I think is actually quite strong. On the blue wall you have people who are often quite affluent, they’re paying quite a lot in tax and they’re looking at their public services and thinking, what are we getting for our money? And they’re trying to tap into the sense of a social contract has been broken under Conservatives, that you work hard, pay your taxes and the state supports you.

George Parker
And of course, we haven’t mentioned sewage, of course, which is quite a big theme of the Liberal Democrat campaign across the country, isn’t it? Sewage and rivers.

Jasmine Cameron-Chileshe
Yeah, and initially I was actually quite sceptical because I mean that maybe this is quite a typical London perspective. I kind of thought, who really cares that much about rivers? But actually as soon as you go out of the cities, a lot of people do care about their local environment. And I think again, they’re tapping into this feeling of public service is breaking down because you would assume that the government is ensuring that our rivers are clean and safe and the Lib Dems are arguing, well, hang on a minute, they’re not clean and safe. And it’s a result of Tory government and lack of investment in some of our natural resources.

George Parker
So the Lib Dems did do pretty well actually the last time these council seats were up in 2019; I think they gained about 700 seats on the night. But I think it’s actually the Lib Dems are quite confident of making further progress this time. Robert, in the red wall, the Labour party are trying to play down their prospects, aren’t they?

Robert Shrimsley
Well, I mean, we’re seeing this ridiculous process that we see every election where both sides talk about how they really would be very lucky to make any gains at all. I mean, you saw the Conservative party chairman who persisted in pushing out this figure of, you know, people are saying we’re going to lose 1,000 seats, which means that they are absolutely confident they’re going to be nowhere near that at all. Labour, meanwhile, have been playing down their expectations.

But it’s very clear that the Tories are working particularly hard in certain areas that were very important for them in their last general election victory — around Tees Valley, in some of the Midlands stronghold, places like Dudley, in places like Stoke, and as you’re going further north, places like Redcar and Middlesbrough where their vote has been strong in the past and where they are particularly playing things like the immigration issue, the small boats issue, which has risen up the salience levels for voters. It plays particularly strongly in places like that. You and I were talking to somebody a little earlier from the Labour side saying that in the campaigns they’re seeing, the Conservatives aren’t talking about the cost of living issue at all. They’re talking relentlessly about immigration and small boats and how they’re gonna tackle it. And that seems to be what they think is their trump card in those areas.

George Parker
It’s fascinating that, you know, the polls all suggest the economy is the main battleground and will be at the next election. But people talk about other things in these elections. You say small boats or sewage and rivers or the inability to get an NHS dentist — there’s a whole load of things actually sort of going on in the country, which I think the national media don’t always necessarily focus on. So Jasmine, what do you think will happen if the Tories do, let’s say, lose hundreds of seats? Do you Rishi Sunak would just shrug that off?

Jasmine Cameron-Chileshe
I think so, in that because they are breathing such negative numbers that actually, you know, if they do lose a couple of hundred seats, that can be talked up as a win. And in some ways, I think Tory strategists, they’ll be pointing to Sunak’s success on sort of bigger policy issues, for example, getting the Windsor framework done, looking like he’s made some progress on small boats and saying, well, actually we’ve only been in government for six months. We’ve managed to achieve some major wins, we’ve managed to calm the Conservative party down; give us more time when it comes to the national election. We’ll have more things to take to the ballot box. I think in some ways the pressure is on Labour to actually prove that it can, as Robert was saying, transform its high poll ratings into turnout in the ballot box.

George Parker
Hmm. Robert, Keir Starmer — anecdotally, how is he actually doing on the ground? I was up in Lincolnshire this week — very safe Tory terrain — but something that keeps coming up is the fact that people just don’t seem to really like Keir Starmer very much — don’t know what he stands for, and they think he’s a bit of a moaner.

Robert Shrimsley
Yeah, I mean, I think there’s no question that the evidence keeps coming back the same, which is that Labour’s doing pretty well. Starmer is doing much less well and it’s very clear that he’s not capturing any affection, he’s not enthusing or winning admiration. But in one sense that hasn’t been the game plan. The game plan is to have been to reassure, to slay all the dragons from the Corbyn era and say, look, you can actually trust us. You know, you may not love me, but I can be trusted as prime minister.

George Parker
Yeah.

Robert Shrimsley
And you know, well, he’s been quite successful, I think, in that respect. And I think what we’re seeing now is there’s a battle of nerves going on in both parties where both sides are being urged to hold their nerve. And there’s still an enormous gap, by the way, between Labour and the Conservatives. But as the polls tighten, people start ramping up the pressure on Keir Starmer to give out more of the policy, explain what you’re gonna do more, offer more optimism, more vision. And with Rishi Sunak, you know, if he doesn’t begin to show a bit of movement in the polls, his MPs will start to panic again, but at the moment they’re quite pleased with how it’s gone for the last few months and they’re thinking, oh, we’ve got a winner here and he’s gonna start narrowing the gap. So while I don’t expect any great upheaval in either party after this election, it does go to the nervousness that both sides are feeling. And I think the battle that they’re gonna be fighting is less a battle with the public mind, a lesser battle even with the media about who won these elections, but the battle for the hearts of their . . . and minds of their own party members and their own MPs.

George Parker
Yeah. Now, we talked a bit about Keir Starmer. Jasmine, what about Rishi Sunak? I mean, he plainly is still trying to sort of establish himself with the electorate. People seem to have clocked the fact that he’s quite technocratic; a lot of people mention the fact he’s quite rich. Have you detected any sense that he’s starting to turn things around for the Conservatives?

Jasmine Cameron-Chileshe
I think in some ways, you know, it definitely has an uphill battle in that he’s coming in the wake of Boris Johnson, of Liz Truss, coming in the wake of individuals who have had such an impact in the public psyche and such an impact on the economy. I think it’s very difficult for him to detangle himself from that and establish himself as an individual, especially because he doesn’t have any major key policy ideas to cling on to. And what was quite interesting when I did some on-ground reporting in Surrey is that the impacts of, say, for example, the Truss mini-Budget are just being felt, people who were just signing on to new mortgages. And so in some ways there’s a delayed effect where the leaders have gone — Truss and Johnson — but the impacts of their policies are only now trickling through and it’s Sunak that has to be the leader on top of all of that. So I think there is an element of he’s only been in power for six months, people want to give him a chance, but I don’t think there’s an overwhelming sense of warmth towards him. I think there is a wait-and-see approach being taken by the public.

Robert Shrimsley
I also think, I mean, this is one of those areas where there’s a gap between the narrative that you get coming out of Westminster and what we’re actually seeing. So, out of Westminster, the story is Rishi Sunak’s come in, he’s restored order, competence. People are seeing a capable prime minister. They like the look of, again, polls are narrowing and these things are all sort of true. But then if you actually look at the state of the opinion polls, the Conservatives are still less popular than they were before Liz Truss became prime minister. He is leading a party that is still less popular than it was under Boris Johnson as he was getting to his most unpopular stage. So it’s true that things are better than they were under Liz Truss, but actually the notion that he is really cutting through with the country and that people suddenly like the Conservatives again, that’s simply not borne out, but what you are seeing in opinion polls and what you’re hearing from voters.

George Parker
Well, next week, if you’re lucky enough to be in an area with elections taking place, don’t forget to go out and vote. And don’t forget to take your voter ID with you. Jasmine and Robert, thanks very much for joining us.

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And that’s it for this episode of the FT’s Political Fix. If you like the podcast, we’d recommend subscribing. You can find us through all the usual channels to receive episodes as soon as they’re released. And we also appreciate positive reviews and ratings.

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The FT’s Political Fix was presented by me, George Parker, and produced by Anna Dedhar and Josh Gabert-Doyon. The executive producer is Manuela Saragosa. The sound engineer is Jan Sigsworth. Until next time, thanks for listening.