CBI UPDATE MARCH 2018
CBI 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 Scotland Northern Ireland North East Yorkshire & Humber North West Access Insight East Midlands Wales East of England West Midlands London South West South East & Thames Valley 2
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 . 3
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 . 4
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. 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. EU negotiations 5
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 & GDP growth (q/q%) and contributions hospitality), along with solid growth in (ppts) manufacturing. • Production Construction Services GDP growth (q/q%) Growth for 2017 as a whole stood at 1.8%. This was down only slightly on 2016 (1.9%), but marked the 0.9 lowest annual growth rate since 2012. 0.8 • Annual growth is likely to remain subdued during 0.7 2018, with the key judgements underpinning our forecast broadly unchanged: 0.6 o 0.5 Inflation should fall gradually, but real household incomes will be squeezed given 0.4 tepid wage growth, which will weigh on 0.3 household spending. 0.2 o Uncertainty around Brexit weighs on business 0.1 investment growth, particularly spending on 0.0 large projects. -0.1 o Net trade will continue to deliver a more -0.2 meaningful boost to the economy, supported 2016 2017 by a lower pound and strong global growth. 6
CBI SURVEYS POINTED TO STABLE GROWTH IN JANUARY, BUT AT A FAIRLY SUBDUED PACE Key Optimism Output/Volumes Prices and Costs Employment Investment Positive Neutral Manufacturing Negative Retail Consumer Services Business and Professional Services Financial Services Source: CBI business surveys • 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 7
BREXIT - THE UK GOVERNMENT HAS QUITE THE TO DO LIST - Negotiate the - Pass the withdrawal necessary - Establish a agreement legislation through position on the parliament future economic - Negotiate relationship transitional - Get Government arrangements ready for no deal 8
TRANSITIONAL ARRANGEMENTS ARE PROGRESSING • Prime Minister in the Florence Speech: about 2 years Managing the politics • EU: End transition with the Multiannual Financial over end date Framework • Remaining in the single market and a customs union Debate over legal basis in all but name and format • All rights and obligations Uncertainty over the cliff • The UK will be a third country from March 2019 • How steep will the cliff edge be? edge • Route for the UK to influence during transition period Some “twiddles” which • Restrictions on free movement of EU citizens arriving create challenges in the UK from March 2019 • A bridge to implement the new deal? Uncertainty over purpose • A pause to allow more time for negotiation? 9
BUT THE BIG DEBATE FOR THE START OF THIS YEAR IS ABOUT REGULATORY ALIGNMENT Equivalence Alignment Divergence “There will be areas “There will be areas “There will be areas which do affect our where we want to which do affect our economic relations where achieve the same economic relations we share the same goals in the same where we and our goals but want to ways , because it European friends achieve them through makes sense for our may have different different means .” economies.” goals.” 10
THE EU RESPONSE- WHAT THE CBI IS HEARING FROM THE EU27 Denmark, Sweden & Finland France and Germany • • Most emotional Politics over economics • • Keen to see close regulatory Concern over deregulation • cooperation Integrity of the single market Belgium, Luxembourg & Norway & Switzerland Netherlands • • Waiting for EU Most prepared • negotiation to finish Economically pragmatic Republic of Ireland Iceland & Lichtenstein • Unique and urgent • Concerned they’ll be forgotten by both Italy and Spain sides & EEA • Weary of Franco-German axis Croatia, Cyprus & Bulgaria, Hungary, Poland, Estonia • Slovenia & Slovakia Inferiority complex • • Economically pragmatic Narrow national • May not stand up to self-interest France/Germany Czech Republic, Lithuania & Malta • Active business lobbying 11
BUSINESSES ARE GETTING READY FOR BREXIT Businesses fall on a spectrum of preparedness, by both size and sector: Leisure Professional Financial Mining Food Retail Tech Logistics services services Least prepared Most prepared Large SMEs MSBs firms 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: 10% have already 25% will implement 25% will implement started implementing from start of January from end of March contingency plans 2018 2018 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. 12
WHAT SME MEMBERS ARE TELLING THE CBI Least prepared Most prepared • 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 13
CONTACT US Richard Blackmore Regional Director, East Midlands e: richard.blackmore@cbi.org.uk t: 07469 155289 linkedin.com/company/cbi @CBItweets 14
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