CBI UPDATE MARCH 2018 CBI The CBI operates across 12 regions in - - PowerPoint PPT Presentation

CBI UPDATE

MARCH 2018

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CBI

East Midlands Scotland Northern Ireland North West Yorkshire & Humber Wales North East West Midlands East of England London South West South East & Thames Valley

The CBI operates across 12 regions in the UK plus China, India, US and Brussels

• internationally. Each region has its own regional council made up from members

which helps shape CBI policy.

Influence Insight Access

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PROSPERITY AGENDA

Pillar goals for 2018:

• Address the skills emergency with better careers advice, technical education , levy reform and adult

reskilling.

• Take clear steps to make work fair and flexible to support an open, diverse and productive workplace.

Key priority for Q2:

• Work with government stakeholders and step-up political engagement following the delay of white

paper on immigration to help deliver a new immigration system that ensures businesses can continue to access the skills of all levels they need to deliver prosperity. Pillar goals for 2018:

• Use devolution as a driver to turn intent on infrastructure delivery into action
• Position the UK to benefit from affordable, low carbon, innovative energy generation and networks
• Prioritise financial investment within the business environment

Key priority for Q2:

• Use discussions in Q1 member governance round to inform CBI workplan on regional infrastructure

delivery and ensure action on road and rail projects better link our cities and regions with each other, as well as the rest of the world, to drive prosperity and productivity growth across the UK.

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PROSPERITY AGENDA

Pillar goals for 2018:

• Set out an approach to a fair tax and regulatory system for the future, delivering growth and public

services that supports productivity growth for all firms, places and sectors.

• Ensure effective fiscal events that drive prosperity across the UK .

Key priorities for Q2:

• Begin work on the CBI’s tax in the modern economy campaign to ensure the tax system is fit for

the modern economy, providing government with the revenues it needs to deliver vital public services.

• Publish research highlighting businesses’ total tax contribution to the Exchequer to highlight the

importance of a competitive tax environment to retain and attract business activity in the UK. Pillar goals for 2018:

• Lay out a clear path to 3% of GDP on R&D, evenly spread across the UK.
• Campaign for all firms to take up existing tech to boost productivity.
• Step into the debate on the social impact of technology.

Key priority for Q2:

• With the government now committed to spending 2.4% of GDP on R&D by 2027, the CBI will look

to develop its 3% campaign by setting out a clear roadmap with priorities for investment that will see the UK’s overall investment grow over the next decade to support greater levels of innovation.

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PROSPERITY AGENDA

Pillar goals for 2018:

• Show that an export-led economy will unlock productivity for every community
• Grow a trade strategy that encourages inward and outward investment, rebalancing regional &

devolved inequalities Key priority for Q2:

• Improve the UK’s disappointing performance in exports by launching a new project with CBI

members to determine the skills and too necessary for firms to break into new markets and expand their international footprint. EU negotiations Campaign goal for 2018:

• Intensify CBI insight & influence to secure a good Brexit deal for all parts of the UK – tough choices,

based on evidence not ideology. Key priority for Q2:

• Compile a Brexit preparedness toolkit for CBI members to assist them in their Brexit readiness

preparations by helping businesses to assess their Brexit exposure and share best practice.

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ECONOMIC GROWTH SOFTENED IN 2017, BUT HAS BECOME MORE BALANCED

• GDP growth edged up in Q4, to 0.5% q/q, driven by

a pick-up in services (though not distribution & hospitality), along with solid growth in manufacturing.

• Growth for 2017 as a whole stood at 1.8%. This was

down only slightly on 2016 (1.9%), but marked the lowest annual growth rate since 2012.

• Annual growth is likely to remain subdued during

2018, with the key judgements underpinning our forecast broadly unchanged:

• Inflation should fall gradually, but real

household incomes will be squeezed given tepid wage growth, which will weigh on household spending.

• Uncertainty around Brexit weighs on business

investment growth, particularly spending on large projects.

• Net trade will continue to deliver a more

meaningful boost to the economy, supported by a lower pound and strong global growth.

• 0.2
• 0.1

0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 2016 2017

GDP growth (q/q%) and contributions (ppts)

Production Construction Services GDP growth (q/q%)

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CBI SURVEYS POINTED TO STABLE GROWTH IN JANUARY, BUT AT A FAIRLY SUBDUED PACE

Optimism Output/Volumes Prices and Costs Employment Investment Manufacturing Retail Consumer Services Business and Professional Services Financial Services

Key Positive Neutral Negative

• CBI surveys show that sentiment remains depressed and cost pressures continue to bite
• Consumer-facing firms are being hit by the ongoing squeeze on real household incomes, but the more

export-orientated manufacturing sector is still riding the wave of the lower pound and firm global growth

Source: CBI business surveys

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BREXIT - THE UK GOVERNMENT HAS QUITE THE TO DO LIST

• Negotiate the

withdrawal agreement

• Negotiate

transitional arrangements

• Establish a

position on the future economic relationship

• Pass the

necessary legislation through parliament

• Get Government

ready for no deal

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TRANSITIONAL ARRANGEMENTS ARE PROGRESSING

• Prime Minister in the Florence Speech: about 2 years
• EU: End transition with the Multiannual Financial

Framework

Managing the politics

• ver end date
• Remaining in the single market and a customs union

in all but name

• All rights and obligations

Debate over legal basis and format

• The UK will be a third country from March 2019
• How steep will the cliff edge be?

Uncertainty over the cliff edge

• Route for the UK to influence during transition period
• Restrictions on free movement of EU citizens arriving

in the UK from March 2019

Some “twiddles” which create challenges

• A bridge to implement the new deal?
• A pause to allow more time for negotiation?

Uncertainty over purpose

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BUT THE BIG DEBATE FOR THE START OF THIS YEAR IS ABOUT REGULATORY ALIGNMENT

Divergence “There will be areas which do affect our economic relations where we and our European friends may have different goals.” Equivalence “There will be areas which do affect our economic relations where we share the same goals but want to achieve them through different means.” Alignment “There will be areas where we want to achieve the same goals in the same ways, because it makes sense for our economies.”

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THE EU RESPONSE- WHAT THE CBI IS HEARING FROM THE EU27

France and Germany

• Politics over economics
• Concern over deregulation
• Integrity of the single market

Italy and Spain

• Weary of Franco-German

axis Republic of Ireland

• Unique and urgent

Belgium, Luxembourg & Netherlands

• Most prepared
• Economically pragmatic

Denmark, Sweden & Finland

• Most emotional
• Keen to see close regulatory

cooperation Bulgaria, Hungary, Poland, Slovenia & Slovakia

• Economically pragmatic
• May not stand up to

France/Germany Croatia, Cyprus & Estonia

• Inferiority complex
• Narrow national

self-interest Czech Republic, Lithuania & Malta

• Active business lobbying

Norway & Switzerland

• Waiting for EU

negotiation to finish Iceland & Lichtenstein

• Concerned they’ll be

forgotten by both sides & EEA

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BUSINESSES ARE GETTING READY FOR BREXIT

Businesses fall on a spectrum of preparedness, by both size and sector: There is a lot of good work going on to prepare, with 87% of members having discussed Brexit at board level, and over a third creating an internal steering group or committee. But time is running out: And effects are already starting to be felt, with 36% of businesses saying Brexit has negatively affected investment, and 41% saying it has hit recruitment and retention.

Least prepared Most prepared SMEs MSBs Large firms Financial services Tech Logistics Food Retail Mining Leisure Professional services

10% have already started implementing contingency plans 25% will implement from start of January 2018 25% will implement from end of March 2018

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WHAT SME MEMBERS ARE TELLING THE CBI

• Preparation Counts – reducing the risk and maximising the opportunities
• Shifting Bases – moving operations away from the UK
• Rising Costs – movement is not free!
• Risk to innovation – EU funding major contributor
• New Skills Required – exporting in a tariff based environment
• Opportunity in Confusion – chaos offers its own opportunities
• Strength From Within – invest in training and fill the skills gaps

Least prepared Most prepared

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CONTACT US Richard Blackmore Regional Director, East Midlands e: richard.blackmore@cbi.org.uk t: 07469 155289

linkedin.com/company/cbi @CBItweets