Sunak accused of burdening UK economy with legislative ‘chaos’

Rishi Sunak will on Monday be accused by a senior business leader of adding legislative “chaos” to the faltering UK economy, amid increasing signs that corporate Britain is disenchanted with government policy.

Tony Danker, head of the CBI employers’ group, will claim in a hard-hitting speech that the prime minister’s plan to scrap hundreds of laws of EU origin at the end of the year is creating “huge uncertainty for UK firms”.

In an interview with the Financial Times, Danker added his voice to increasing business demands for effective government policy to support UK economic growth.

Danker’s speech will reflect rising unease among British companies about the expected recession this year, and the damage caused by Brexit.

In a wide ranging critique of government policy, Danker will warn that Sunak’s decision to rip up EU-made laws risks “throwing industry into some chaos just at the time we’re trying to exit recession at the end of the year”.

The government’s retained EU law bill stipulates that up to 4,000 EU-originated laws covering areas such as consumer protection and workplace rights will expire on December 31 unless ministers specifically decide to keep them.

The CBI is set to make clear that business does not share Rishi Sunak’s desire for a bonfire of red tape, if done for its own sake © Owen Humphreys/WPA Pool/Getty Images

Sunak insists this will create more agile rules for new industries, but Danker will say in his speech: “Companies are asking ‘Will we really erode maternity and paternity regulation or health and safety standards?’”

Danker makes clear that business does not share Sunak’s desire for a bonfire of red tape or divergence of UK rules from EU regulations, if it is done for its own sake.

“Divergence is high-stakes politics and economics,” he will say. “We need to recognise that divergence will often shrink our market size or add a skip-load of red tape.”

Last week in Davos, business secretary Grant Shapps admitted Brexit had caused “significant challenges” for UK business, while outlining a growth plan which he described as “Silicon Valley with a British edge”.

But some British businesspeople at the World Economic Forum in Switzerland returned home in a gloomy mood, reporting that the general reaction among the global elite to the UK was one of either indifference or sympathy.

“Economics are continental,” said one business leader. “This was the first real Davos since Brexit. There was a real sense of a new reality dawning. We are not invited to the top table.”

A leading financier added: “There was a general sense of optimism about the world opening up — but there was still a cloud over the UK. A number of us felt it. I went to a dinner and we were all depressed and drank too much.”

Meanwhile Jesper Brodin, chief executive of main Ikea retailer Ingka, said in Davos that Brexit had made cross-border operations “much more chaotic”.

Chancellor Jeremy Hunt will on Friday set out in a speech the areas he believes will drive growth in the British economy, and also identify weaknesses he wants to address in his March Budget.

Hunt has charged Sir Patrick Vallance, the government’s chief scientific adviser, with coming up with proposals for growth in key sectors, which Danker will welcome.

Hunt also wants to tackle the issue of inactivity in the workforce, but Danker will warn that the British labour market is “failing” as multiple sectors grapple with worker shortages, adding: “If the government wants to reject using economic migration to fill immediate vacancies — something business disagrees with — then their labour market interventions must be the boldest in the world.”

He will also warn that the US and countries in the EU and Asia are pushing ahead with plans for big investments in green technologies.

He will tell UK ministers that “international competitors in Europe, Asia and the US are going hell for leather on green growth and getting firms investing . . . we are behind them now and seem to be hoping for the best”.

Workers in London in the rain
The UK will fall from fifth to 30th in OECD rankings for tax competitiveness in April when existing incentives come to an end, according to the CBI © Carlos Jasso/Bloomberg

Danker acknowledged to the FT that Sunak had brought an end to the political crisis that surrounded Boris Johnson’s exit as prime minister and the shortlived premiership of Liz Truss.

He suggested the tumult had exacted a heavy price, saying: “The political chaos of the autumn definitely stopped some major investment coming to the UK. I believe that will change but not overnight.”

The UK will fall from fifth to 30th in OECD rankings for tax competitiveness in April when existing incentives come to an end, according to the CBI. British business investment is now ranked alongside Turkey and Greece, it added.

Danker will say in his speech: “Denial of where our economy is right now compared to our international competitors is the surest way to leave the UK’s growth prospects faltering this decade.”

Tesco chair John Allan said last week the government needed a “serious, thought through, long-term growth plan”. 

Sir James Dyson said growth had “become a dirty word” under Sunak in an article in the Daily Telegraph, as he called for plans to “incentivise private innovation and demonstrate ambition for growth”. He criticised a “stupid” and “short-sighted” approach to tax on companies.

The CBI wants the government to replace its super-deduction tax allowance, which was designed to encourage capital spending by companies but expires in April, with new incentives for business investment.

UK corporation tax increases from 19 to 25 per cent in April, and Danker said that by just raising businesses taxes, Sunak was pursuing “an anti-growth policy, not a pro-growth policy; an anti-investment policy, not a pro-investment policy”.

A government spokesperson said: “As the business secretary said in Davos, growth is the cornerstone of a stable and prosperous economy, and the prime minister has set out a clear agenda for how we will drive growth in the UK.”

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