In some ways, I’m not surprised by the breakdown in relations between the PM and business. While Mayor of London, it suited Boris to rely on — and court — businesses, big and small.
Today it is a very different story. Recent referendum and General Election wins have been built on “Taking Back Control”, limiting immigration, and seizing the political centre-ground.
Boris is mimicking Blairite moves from the opposite political direction and sucking the oxygen from Sir Keir Starmer and his “new” Labour Party. While the centre ground was pro-business in Blair’s time, today it is not.
Relations could thaw. I recall a very successful, three-day mini-Davos on Thames before the Olympic Games in 2012 to stimulate foreign direct investment. Boris, then-PM David Cameron, and Chancellor George Osborne charmed the leading global investors, bankers and private equity barons. The Mayor had the crowd in stitches that summer afternoon. Johnson appears to be hoping for a similar success at the government’s global investment gathering in Windsor in a few weeks’ time around COP26.
Still, the economy remains in a pickle. It shouldn’t be a surprise. The pandemic has caused supply chain disruption and labour shortages, which are not unique to the UK. It has delayed the negative impacts of Brexit. But the impact is now beginning to be felt.
Although I was a Remainer, I accept the electorate’s decision. However, leaving the EU has knocked us off our GDP growth track and it will take a number of years to adjust to. If you withdraw from a free trade bloc, it shouldn’t be a surprise that you create friction.
We have to get off our backsides and in the case of S4, my company, sell our digital services globally. Britain has already fallen from fifth to 11th in trade with Germany in just six months after Brexit. Brexit demands that if we are to become a high wage, low tax “Singapore on steroids”, we have rapidly to shift our trading patterns away from dependence on the major economies in the EU and towards the Americas, Asia-Pacific, the Middle-East and Africa. The adjustment is going to take a number of years and it will be painful in meantime.
These challenges have been cloaked by the pandemic and the surreal economic conditions that have been created by the massive fiscal and monetary infusions to protect the economy and livelihoods. But the underlying challenges remain.
We must also pay for all the pandemic spending at some point and we’re at the beginning of government moves across the globe to increase taxation — corporate, personal and capital. At the same time, we need long-term public and private investment in hard and soft infrastructure to counteract the negative impacts of globalisation on manufacturing, climate change, the impact of digitisation on the high street, the pandemic, and Brexit. The stimulus necessary to protect employment from the impact of the pandemic has boosted global GDP growth this year to five to six per cent and next year to four to five per cent. Just wait for 2023 when growth slows to a more normal level of two to three per cent.
My bet would be that Boris, expedient as ever, will call an early General Election, which will enable his new Government — if re-elected — to put on the economic brakes even harder, among other things, in the form of even higher taxes.
Sir Martin Sorrell is executive chairman of S4 Capital