City executives say they’re warming to ‘now electable’ Labour – Financial News


Three years ago, the prospects of a Labour government in Downing Street filled many City executives with terror. Jeremy Corbyn’s policies were seen at the time as radical and anti-business.

Now things couldn’t be more different.

Prime Minister Liz Truss’ mini-budget, where the political party typically seen as most cozy with Square Mile executives instead rocked Britain’s economic outlook and sent the pound tumbling, has accelerated a trend that had already been mounting, say executives including Sir Martin Sorrell, founder and executive chair of S4 Capital.

A combination of factors has helped chip away at Tory support. Years of efforts by Corbyn’s successor, Sir Keir Starmer, to become a “pro-business government” and distance himself and his Labour Party from his predecessor may have started paying off. Meanwhile, the Conservatives — plagued by a scandal-prone Boris Johnson and an image of haphazardly handling Brexit — has been driving voters, and donors, towards Labour.

The Labour Party conference in Liverpool last month had its highest business attendance since 2010, with more than £200,000 raised from corporate sponsorship arrangements, according to the Financial Times.

“This government, in its various forms, now on its fourth prime minister and with debt insurance higher than Italy or Greece, has brought the country to its knees economically and reputationally,” former BT and KPMG chair Sir Mike Rake told Financial News.

“The first misstep was Brexit, followed by a disastrous exit treaty, which not only caused serious economic damage, but damaged our reputation globally and undermined our relationship with our key political and trading allies in the EU and the US.”

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Rake added recent market turmoil prompted by Chancellor Kwarsi Kwarteng’s mini-budget on 23 September “was the straw that broke the camel’s back”, referring to business support for the government.

The mini-budget, which included plans to scrap the 45% rate of income tax for the UK’s highest earners and increase government borrowing, caused the pound to slump to an all-time low against the US dollar.

The Bank of England was later forced to launch a £65bn emergency programme to buy government bonds to calm the markets.

Despite a U-turn from the chancellor on scrapping the higher rate of tax, Rake said Labour was “now electable”.

“Even if not charismatic, Kier Starmer has integrity, is pragmatic and competent,” adding that shadow chancellor Rachel Reeves “is going down well with business”.

“Maybe we’ve had enough of charisma, incompetence and ideology and are beginning to believe the ‘experts’, so decried, but now proven to have been right, during the EU referendum,” said Rake.

One C-suite executive based in the City said the Tories had lost support as a result of the turmoil caused by the mini-budget.

“The City is very concerned about fiscal responsibility. Nobody in the City likes it when someone thinks they are right – nothing is more dangerous. We’ve seen it when portfolio managers or traders are absolutely wedded to their positions, but have been carried out in a box,” they said.

“The Tories have a plan and they believe strongly in it, but they are affronted that anyone is questioning it.”

“Labour is engaged with business leaders and ideas more actively than for years. And business is engaged with Labour again fully,” said Iain Anderson, executive chair of Cicero Group and the government’s former LGBT business champion.

Opinion polls point to Labour gaining an edge over the ruling Conservative Party, with Savanta ComRes on 3 October showing Labour with a 25-point lead over the Tories.

Sorrell said there were signals among business leaders that there was “greater acceptance and exploration of the possibility” of a Labour government.

However, he said a Labour-led coalition government was more likely at the next general election.

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“Despite the U-turn by the prime minister and chancellor, it still looks like a Labour-led coalition, maybe not an outright win, is more likely, unless they quickly implement a credible, funded growth plan,” said Sorrell.

City fund manager Nicola Horlick said it was “highly likely” there would be a coalition government between Labour and the Liberal Democrats, or possibly the Scottish National Party.

“At this point, I think most business leaders think anything would be better than the current situation, and that we live in a democracy and cannot expect to have one party in power forever,” said Horlick.

However, not everyone is optimistic about Labour’s prospects at the next general election.

“There are two conditions [under which] a Starmer government would work,” said Savvas Savouri, chief economist at Toscafund Asset Management. “One is he culled the significant remnants of Momentum, which continue to operate at the grass roots. The other condition is he governs without the need for the Lib Dems as a coalition partner. In terms of these conditions, there is more chance of Spurs winning the Premier League.”

To contact the author of this story with feedback or news, email David Ricketts



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