19 Oct 2022
By Stuart Patrick, Chief Executive of Glasgow Chamber of Commerce
When the British Chambers of Commerce (BCC) submitted a 5-point plan to the Chancellor of the Exchequer well in advance of the mini-budget, the measures chosen were designed to be proportionate and affordable. The primary focus of the plan was the crisis in business costs, with energy bills and employment costs exerting the most severe pressure on UK firms. The BCC argument was that the costs of doing business were just as important an issue as the cost-of-living crisis which was, albeit understandably, getting more political and media attention.
The BCC plan included a temporary winter reversal of employers’ National Insurance Contributions, a reduction in VAT on energy bills and a Covid-style energy costs support package for small and medium sized businesses.
Three weeks ago, I was expressing surprise at how much further the mini-budget had gone beyond the BCC submission. Now it turns out that there really is a limit to the financial markets’ appetite for government borrowing and the BCC’s caution was better judged after all.
There is some relief that there will still be support for business energy bills over the winter and that there is also scope for discussing the extension of that support for vulnerable sectors. The reversal of the rise in National Insurance Contributions remains in place as does the extension of capital allowances. Given the recent speed of events I cannot, of course, guarantee that any of the above remains true when these words are published. Whatever transpires the cost of doing business crisis has not gone away.
The BCC also requested that Ofgem be given a remit to supervise SME energy costs and that there should be a review of the Home Office Standard Occupations List that controls companies’ ability to solve both acute and chronic skills shortages through immigration. Neither of these last two measures was expected to involve extra demands on the Treasury. We will continue to press their case.
But the unravelling of the mini-budget does not just take us back to the original position. Interest rates are now widely expected to be higher than they would otherwise have been with the Bank of England looking likely to raise them further and faster than previously hoped. That must surely have consequences for already anaemic trends in business investment. It will also be the final straw for many companies struggling with pandemic debts incurred through no fault of their own.
Equally alarming must be the implications of the UK government’s fresh need to trim spending. The Chancellor when asked directly in Parliament for guarantees on specific capital investment projects would give no such reassurances. Everything is on the table.
Many of the projects Glasgow Chamber of Commerce is supporting for the expansion of Glasgow’s economy are capital investments. The Clyde Metro, the expansion of the Scottish Events Campus, the physical spaces needed to grow our three innovation districts, the re-purposing of empty city-centre premises and the transformation of our energy systems to meet our net zero targets, are all capital investments which would benefit from UK or Scottish Government support. We must hope that governments can be persuaded of the long-term importance of investments like these or will help design them to attract a greater contribution from private business. At the very least governments at all levels must be even more eager to remove obstacles to projects that the private sector is already keen to deliver.
That business hates uncertainty is now a cliché. But a cliché is usually borne from a basic truth. After a Brexit vote, a pandemic, supply chain disruptions, sustained skills shortages, a war in Ukraine, spectacular increases in energy costs and a draining diet of continuous political drama, many business leaders are running out of patience. Even entrepreneurs who thrive on disruption need a status quo to disrupt.
Is it too much to ask our governments in the coming weeks and months to strive for calmness, consistency and competence?
This article was first published in The Herald on Wednesday 19 October 2022
