The new chairman of Britain’s largest employers’ group has warned that the UK faces a deeper and longer economic downturn than many expected, with living standards likely to fall drastically. at least two years.
Businesses were struggling to protect consumers from rising inflation, he added, calling on the government for a coordinated response to the cost of living crisis, which he said could hit the economy as hard as the pandemic.
In his first interview since being appointed CBI chair this week, Brian McBride said his varied career has given him the experience needed to tackle the various challenges facing the UK economy.
McBride took over from Cobra Beer boss Karan Bilimoria at the CBI. He started his career selling photocopiers for Xerox in Glasgow, before joining technology company IBM, and was hired by Michael Dell of Dell Technology and Jeff Bezos of Amazon to run their respective UK operations.
McBride also launched 3G at T-Mobile UK and currently serves as chairman of Trainline, the digital ticketing company for trains, as well as board positions at companies such as asset manager Abrdn .
The new president also urged ministers not to tear up parts of the Northern Ireland protocol. He argued that the UK needed to negotiate with the EU over the Brexit trade deal, as businesses in the region saw the current arrangement as workable. He added that it was “a time for economics, not politics”.
McBride raised concerns about the impact of strike threats this summer on businesses.
“I never said people shouldn’t be allowed to strike [but] the disruption is going to be costly for businesses,” he said.
Inflation hit a 40-year high in April due to supply chain pressures, rising commodity prices caused by war in Ukraine and the global energy crisis. Last month, the OECD slashed its growth forecast for the UK for 2023, the weakest in the G20, to zero.
Business confidence has fallen sharply, with industrial action once again becoming a concern for employers as the cost of living soars. Companies were already cutting back on investment, McBride said, given rapidly rising inflation and worries about future demand.
“Companies act; they reduce what they can. It is very difficult when things are difficult to say: I am going to spend this money today and I will not benefit from it for three years.
McBride called on the government to speed up plans to replace the “super deduction” tax relief on investment, which the Chancellor promised to consider in the autumn budget.
“We need to encourage investment today, because this investment we are making today will not even pay off in the next 12 to 18 months.” He warned that the peak of the recession is “likely going to be higher and it will take longer to get out of it”.
Until now, businesses have been a buffer against consumer inflation, McBride added, given their reluctance to pass on all the costs they faced. But, he added, companies were often unable to meet inflation in the wage increases they were able to offer.
The CBI chairman said he ‘understands what life on the fringes is like’ as he was one of eight children raised on a Glasgow council estate by his father, a teacher, and mother, who was nurse.
“The costs of people [and] the standard of living will absolutely decline over the next couple of years, no doubt. People will have a more difficult standard of living over the next two years. For individuals and for businesses, we are going through a difficult time,” he said.
McBride called for a more cohesive response from ministers to help businesses deal with the cost of living crisis, arguing that ‘government needs to take responsibility for coordinating the response to this, and we’re not getting that yet. really”. .
Even so, he said relations between the business group and the government had improved since the heated exchanges over the CBI’s opposition to leaving the EU.
McBride said the Brexit debate is a thing of the past. “The last thing this country needs is another two or three years of debate and argument and a terrible civil political war. I think government has evolved, and I think business has evolved.
McBride, who is the Defense Department’s top non-executive director, said he could use his connections across the civil service to further strengthen government-business relations.
He cited the ambition to attract a new generation of technology-driven companies into the employer group. “The CBI tried, but probably didn’t resonate as much with businesses in the digital economy. I think having me there helps build a bridge.
He lobbied for Amazon to become a member and dismissed criticism about whether the UK’s main trade organization should lobby on behalf of foreign businesses – some of whose tax provisions have been questioned in the UK.
“If you have a presence in the UK, or employ people here, I don’t think there’s a problem with them being members. If we were to only represent businesses based in Britain, we would be cutting out a lot of economic activity.
Scottish referendum would be a ‘huge distraction’
Brian McBride has warned that a vote for Scottish independence would be a “huge distraction” given the economic crisis facing devolved areas of the UK.
McBride grew up in Glasgow and went to college there. He still spends much of his time in Edinburgh and Glasgow, where he often watches Celtic play.
He said the region had other concerns beyond the independence debate at the moment.
“That doesn’t mean it’s not important. . . but it will absolutely distract people. Today, government and business should focus on reviving the economy. »
The Scottish government had said ‘getting the economy going and sorting out was task number one’, he said.
“Well, it’s not settled yet. The economy of the United Kingdom, and the economy of the regions, is facing a big, big crisis. And that should be the focus of politicians today and not what I would call political questions.