Richard Burge LCCI

LCCI Tough times but London has

resilience to shine

A lot has happened since Richard Burge’s last article for Borough Business.

Not only have we seen a change of monarch for the first time in 70 years but also a change of PM at Number 10.

Does Richard, CEO of London Chamber of Commerce and Industry, think the Carolean Age (if that is what it is to be called), will begin with a period of major change and is there cause for much optimism?

Given that the cabinet has not changed radically in its make-up, he doesn’t see any great shift in emphasis though he is concerned by the lack of clarity so far.

“It is hard to see what direction Prime Minister Liz Truss’ administration is going to take given there have been so many proposed policy reversals already. The old saying that ‘business hates uncertainty’ is true and that is what we have right now.”

Like many who watched the Conservative Party leadership campaign, Richard is sceptical as to how many of the populist ‘commitments’ are actually (or ever were) deliverable. He also thinks some measures just send out the wrong message at the wrong time – particularly the cap on bank bonuses. “Lifting the cap on bonuses means a few hundred getting a lot of money in their pocket – this is not going to the thousands of businesses that keep London alive”.

“Is there a talent drain in the City? There is a small number moving to Europe but there is no great outflow to, say, New York. Banks are not complaining about problems with recruitment.”

Richard stresses that the real problem in terms of finding talent is being faced by SMEs across many sectors, who cannot find people sufficiently well trained or who have seen skilled staff return to their European homeland with little appetite to return to a country they now feel is unwelcoming.

Tax cuts and inflation

Prime Minister Truss made it clear early on in her leadership bid that tax cuts were on the agenda. Richard agrees that it is the wrong time to be increasing taxes and that they shouldn’t initially have been increased in the aftermath of the pandemic. His concern with taxes is that they are too often used in a non-strategic way. “If you use taxes tactically, rising or lowering between budgets in response to popular demand, this creates more business uncertainty.”

As for inflation, Richard believes the world is so volatile it is difficult to say whether (and when) the rate will go down.

“The businesses that will feel the most pressure is those with less access to cash or borrowing. SMEs don’t have much ballast in anything – be that people or asset value”.

He adds: “In time of high inflation, businesses with low-skill, low wage employees will struggle. They will have to increase wages”.

It is certainly an argument for UK businesses focussed on exports that the weak pound is a helpful tailwind right now. Richard takes this on board but stresses that the price of trading in goods and services is really accelerating and companies are feeling the impact of no longer being part of the EU trading bloc.

“The level of documentation involved and costs, means a lot of UK businesses are not trading with Europe anymore. Trading terms need to ease with Europe. At the moment it is easier to trade with Canada!”

So, what needs to happen? “Both sides (UK and EU) are fighting an argument that has already moved on. Rather than trying to prove Brexit has worked/not worked, they should be asking ‘what is the trading relationship we want in the future?”

As far as Richard is concerned, there has to be an acceptance that EU trade is handled as a collective and build on that.

He explains that the EU is a hugely important trading partner for the UK and unlike China, is an amenable trading bloc. Nor does Richard think mega trade partnerships elsewhere can swiftly dispatch the EU to periphery status.

“The US has never really been a ‘free-trading nation. The easiest place in the world to do business is with the EU.”

London spirit

The UK’s standing in the world may have been damaged by tussles with the EU and even threats to rip up signed agreements, but Richard is confident London businesses are well equipped to succeed regardless. London has a lot of resilience. It is such a diverse place, with wealth coming from a vast number of sources not just the City. For instances, life sciences, creatives and education. Not only is London home to several top 20 universities globally but Middlesex is now one of the largest vocational focussed universities in the world.

“I am optimistic about London – we will find ways of riding this storm; a storm that has been made worse by indecisive government,” he says.

Is there a talent drain in the City? There is a small number moving to Europe but there is no great outflow to, say, New York. Banks are not complaining about problems with recruitment.