00:00Anna, great to have you round the desk.
00:02So when you're talking to British businesses that you represent,
00:05what sort of policies or reforms do they want from Team Burnham
00:09to keep operating in the UK?
00:12Well, of course, I mean, you mentioned tax.
00:14What they would rather like is a tax cut.
00:16Certainly not...
00:17Wouldn't we all?
00:18Wouldn't we all, yeah.
00:19They certainly don't want any more tax rises.
00:21They would like tax simplification and certainty
00:24because that's one of the key challenges they face.
00:26They want regulatory costs to come down.
00:29There is a target for that.
00:30That needs to be pursued as well.
00:33They want electricity costs to be brought down as well
00:37to make British business competitive again too.
00:40So these are many things that have been around for quite a while for businesses
00:43and they're just getting a bit sharper.
00:46You mentioned certainty.
00:47Is there a sense among your members that they're going to hold back
00:50on investment and spending until we know what comes out of the budget?
00:56It rather depends on the sort of commentary trajectory from here
00:59because at the moment, you know, we're quite early on in the new Prime Minister's tenure.
01:07Speculation hasn't been massively high regarding tax changes in the budget.
01:12As you say, a little bit.
01:13And he's, you know, ruled out discussing it, which is the right thing to do.
01:17So at this point, you know, compared to the last two years,
01:22it's not the kind of environment which is where the politics is going to be
01:27a particular pressure on investment and hiring trends.
01:31The challenge is the broader environment applying pressure.
01:35We've got the Middle Eastern conflict persisting.
01:38We've got the ongoing sort of ratcheting up of employment rights
01:42and the implementation challenges that those represent for businesses.
01:46And those are the kind of pressures which are really sort of holding back
01:50some of those big spending decisions.
01:53OK, so more about the external headwinds.
01:55But, you know, when you look at Team Burnham
01:57and the fact that Jim O'Neill didn't want to be a part of it,
02:01he says because he's got other jobs to do and they're very exciting,
02:04he wants to concentrate on them.
02:06Does it knock your confidence in the administration
02:09when we know that Jim O'Neill would have been against, for example,
02:13wealth taxes and higher capital gains taxes?
02:16I mean, it's difficult to read, isn't it?
02:18Because, of course, his position is understandable.
02:21He didn't want to be compromised in his sort of investment choices
02:24and broader positions, which is fair enough.
02:28But we also haven't had any more about, you know,
02:31what might a formal advisory role look like for Richard Hughes.
02:34That would have been an interesting...
02:35Former OBR chair, of course.
02:37Indeed, which would have been an interesting person to have on board.
02:41And, of course, Andy Houdain as well,
02:43who's also got a BCC, British Chambers of Commerce hat on as well,
02:48so brings a bit of the business acumen to the fore as well.
02:51There's been talk about his engagement with the new administration.
02:55So, I mean, that feels a little bit, you know,
02:58that's a little bit hard to read.
03:00And I think elsewhere in what's coming out of Burnham and Friends
03:04is a little bit hard to read as well.
03:06Because on the one hand, the devolution agenda
03:09and some of the more boring but important behind-the-scenes
03:13administrative changes, so number 10 north,
03:17but also, you know, reframing the Cabinet Office
03:19and sort of rebuilding the connections surrounding that
03:23to enhance implementation.
03:25That all looks quite good for growth.
03:27It looks good.
03:28OK, so it's not just, you know, moving the deck chairs on the Titanic.
03:32It's actually going to materially move the needle
03:34for economic growth in the UK.
03:36It could.
03:37Because what they've been doing is...
03:39So, it's machinery of government changes.
03:41So, hence, I describe it as kind of dull.
03:44It's not the headline rebrand that number 10 north is.
03:47It's the stuff that actually matters.
03:49So, how do we actually connect up the right policy, powers, levers
03:54and competences behind the scenes
03:56to enable devolution to be delivered effectively?
03:59So, what's happened is some powers have been taken from Treasury
04:02and MHCLG in relation to devolved economic policy authority.
04:08Cabinet Office has been reshaped.
04:10There's this new National Economic Council, I think it's called,
04:13has been recreated with mayors on board
04:16to try and bring together all the right parts of the growth.
04:21But does that growth come fast enough for the next election in 2029?
04:25This is the challenge, right?
04:27So, it's all the right stuff.
04:28I mean, that's part of the challenge, really, right?
04:31Everything that is good for growth and the UK needs to do
04:34delivers relatively slowly.
04:38And we don't have huge amounts of money to spend either.
04:42So, I mean, this is the big problem.
04:46It's a lot of slow, hard, disciplined work, like cost of living.
04:51Actually, you can't, it's not easy to solve.
04:54We don't have loads of money to alleviate the pressures on budgets.
04:58But the good thing is, when you look at the data lately,
05:01the PMIs, the confidence numbers, actually, they're pretty rosy.
05:06So, do you think that this kind of boosterish tone from Burnham
05:10actually has a material economic impact,
05:13unlike what we saw with the Starmer administration's debut
05:16and the gloomy tone from Starmer and Reeves?
05:18I mean, absolutely, because actually what we saw with Starmer and Reeves
05:24and the run-up to the two budgets,
05:27it did have a deleterious effect on growth.
05:30The OBR highlighted it, actually, in their last budget assessment,
05:35that they thought it had led to weaker economic growth
05:38in the second half of last year.
05:40So, of course, yes, having a clearer communication strategy
05:44and being a bit more upbeat
05:45is likely to have a little bit of a boost for economic growth.
05:50And, yes, you're right, there's been some, like,
05:51positive upside surprises on economic growth.
05:54Inflation isn't dreadful, given what's going on in the Middle East.
05:59The challenge, of course, is that, you know,
06:02the labour market is still weak.
06:04Inflation is going to rise further.
06:06That's going to compromise real household income growth.
06:10So, you've still got these sort of broader economic pressures
06:13which are going to be continuing to constrain things
06:16and keep growth around that rather limp 1% rate.
06:20Well, we've seen such dissent on the Bank of England.
06:22And how do you see the path ahead forming when, you know,
06:25as you say, there is that debate about whether the labour market
06:28is weak enough to keep a lid on inflation?
06:30Yeah, well, the two things they're looking at, as we know,
06:32is what's going to happen with wages
06:34and what's going to happen with price setting by companies.
06:37So, the labour market, all the reads on the labour market
06:40look fairly subdued.
06:42Vacancies are continuing to fall.
06:44Wage growth is coming down relatively in line with expectations.
06:47So, the labour market side, it looks like that's not going to be
06:51a major source of inflationary pressure
06:53for the Bank of England to be concerned about.
06:55The interesting thing will be, like,
06:57if we've got this sort of reinvigorated confidence
07:00and economic buoyancy,
07:01does that create conditions in which firms are more able
07:05to pass on price rises?
07:07So, does that create an additional source of inflationary pressures?
07:11Meanwhile, we suspect that food price inflation
07:13is going to become higher still later in the year.
07:16It's expected to go up anyway
07:18because fertiliser costs, etc., have pushed up.
07:22But now we've had, you know, worst harvest probably on record
07:26in the UK and harvest impacts across Europe as well.
07:29So, that's going to have an inflationary impact.
07:32We know that's the measure that consumers look at and worry about.
07:36So, it's still a bit complicated,
07:38but at least it's nice to have a bit of better news recently.
07:42It is not.
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