UK business leaders to be wooed by Rishi Sunak, as Labour cuts ties with CBI

Introduction: Sunak to woo corporate Britain with new business forum

Good morning, and welcome to our rolling coverage of business, the world economy and the financial markets.

UK corporate leaders will get a chance to lobby Rishi Sunak today, as the prime minister holds the first of a series of summits with business chiefs.

Sunak is launching a new conference called Business Connect which, the government says, will “champion the dynamism of UK businesses to unlock innovation and grow the economy”.

Boris Johnson had a notoriously dismissive view of business concerns about Brexit, but rather than firing off f-words, Sunak is aiming to repair the damage caused to relations in recent years – and fend of Keir Starmer’s efforts to make Labour the party of business.

Downing Street says today’s event will involve “direct and detailed discussions across key industries”, involving over 200 CEOs and other senior business leaders, and investors.

Diageo, Barclays and Currys are among the firms expected to attend, along with attendees from tech, life sciences and advanced manufacturing.

Sunak is expected to pledge to provide conditions for businesses to thrive and help drive the economy, so could get his ear bent over issues such as labour shortages, trade frictions with Europe, and the burden of high energy bills.

Britain’s lacklustre economic growth could come up too – with the IMF predicting the UK will be the worst-performing major economy this year.

But, one business lobbyist has told the Financial Times that his members were “wary” of Business Connect because it was not a cross-party initiative.

Sunak is also holding a LinkedIn Live event on Monday morning, where a group od “entrepreneurs, SMEs, innovators and young people” can quiz the PM.

Lobbying the government on behalf of businesses was a key role of the Confereration of British Industry. But on Friday night, the CBI mothballed its operations until June, after a flood of members quit or suspended operations following the Guardian’s reporting of alleged sexual misconduct by male employees at the lobbying group.

Yesterday, the Labour party revealed it had stopped working with the CBI.

Jonathan Ashworth, the shadow work and pensions secretary, told the BBC’s Sunday with Laura Kuenssberg programme that the lobby group needed “a root and branch review and reform process”.

Ashworth said:

“I just feel for the people who have been victims, and that the CBI has really got to get its house in order.”

The future of the CBI continues to hang in the balance; last weekend, one business leader warned its brand was “beyond repair”.

Andy Wood, chief executive of the Suffolk brewer Adnams, told BBC Radio 4’s Today programme on Saturday:

“I think probably the CBI brand is now beyond repair. It will have to reinvent itself root and branch.

The CBI is understood to be holding an all-staff meeting today to update employees on its plans. Some CBI staff are understood to be concerned about potential redundancies at the group, and surprised there’s been no discussion yet around job security.

The group faces a crucial week ahead. Early in the week it is expected to respond to a report by Fox Williams, an external law firm commissioned to carry out an independent investigation into allegations of harassment and sexual misconduct.

Rain Newton-Smith, the CBI’s former chief economist, is also this week expected to take over as director general, after being appointed this month.

Readers Also Like: Economists predict Federal Reserve rate cuts starting June 2024

Also coming up today:

The head of energy regulator Ofgem is expected to call for a new register of vulnerable households, to offer them better protection.

Ofgem is hosting a ‘Vulnerability Summit’ to focus on the issue.

Jonathan Brearley, Ofgem’s chief executive, is expected to tell attendees:

“We should all consider building towards a joint register, not just between water and energy, but including local and national government.

“Ideally, this register would be based around a ‘tell us once’ principle –where families who have vulnerabilities tell one agency about this and, with permission, this is shared across the others with a single, reliable source of data to anticipate, identify, and respond to the needs of those customers.”

The agenda

9am BST: Ofgem holds Vulnerability Summit 2023
9am BST: Ifo survey of Germany’s business climate
1.30pm BST: Chicago Fed index of US economic activity

Key events

The asking price of UK homes has inched up in the last month, by 0.2%, as calm returned to the housing market after the chaos of the mini-budget last year.

This lifted the average price-tag on UK homes to £366,s47, up £890 versus last month, according to Rightmove.

The situation is toughest for first-time buyers – the properties they typically aim for have hit a record high price, as covered here.

Victoria Scholar, head of investment at interactive investor, tells us:

The housing market appears to be showing signs of stabilisation as mortgage rates come off the highs seen in the aftermath of the mini-budget, rental prices rise making buying look increasingly attractive, and sellers cut asking prices to bolster demand for properties.

The economy is also proving to be more resilient than last year’s expectations with the UK now forecast to stave off a recession this year as inflation finally cools.”

Several UK business chiefs are backing Rishi Sunak’s new “Business Connect” forum as it kicks off today.

Debra Crew, CEO-designate of drinks giant Diageo, is pleased to see Downing Street engaging with businesses:

“Such high level engagement by the Prime Minister and other members of the Government is really welcome for Diageo. We see Business Connect as a great opportunity to promote international trade in Scotch and spirits, an export powerhouse that is bringing jobs and investment to Scotland and across the UK.”

C.S. Venkatakrishnan, group chief executive of Barclays, said:

“I am pleased to join the UK Government and business leaders in the discussion about the growth opportunities that lie ahead for the United Kingdom.

The UK continues to be a prominent financial centre that sits at the heart of global capital markets and Barclays continues to support the UK Government’s ambitious plans to drive prosperity and economic growth for people and businesses here in the UK and beyond.”

Alex Baldock, group chief executive of Currys PLC, will be attending too, and says:

“It’s important that business can make its voice heard in government at events like today’s. Given the size of the retail sector in the UK, we’re well placed to help power the UK’s growth. I’m looking forward to discussing with ministers the skills, infrastructure, regulatory and tax environment we need in order to do so.”

UK economic troubles push profit warnings back to Covid-19 levels

Profit warnings from UK-listed companies are continuing to rise, casting a shadow over Rishi Sunak’s push to win back support from corporate Britain today.

Readers Also Like: Earnings call: Phillips 66 outlines strategic progress amid challenges

UK-listed companies issued 75 profit warnings in the first quarter of this year, new data from EY-Parthenon this morning shows. That’s the highest first quarter total since the early stages of the pandemic in 2020, and above the 10-year quarterly average.

Many of these warnings were triggered by economic uncertainty – with a third blamed on delayed, reviewed, or cancelled contracts, as clients paused or slashed their spending.

There was a surge in turmoil in the technology and telecommunications (TMT) sectors too, with warnings almost tripling year-on-year to 16 in total. They have been hit by cost-cutting, uncertain demand, and difficulties in accessing capital.

That should worry the government, given chancellor Jeremy Hunt’s goal of making the UK the “next Silicon Valley”.

Will Fisher, EY UK Strategy and Transactions TMT Leader, explains:

“Significant disruption and uncertainty, particularly in consumer facing markets, is having a knock-on effect on the TMT sector as businesses revaluate their cost bases and delay purchasing decisions.

The result is short-term revenue growth challenges for TMT companies, many of which are also trying to prioritise profitability and cash flow as they face a tighter and more expensive lending environment.

Prime Minister Rishi Sunak says today’s summit with UK corporate leaders is part of his growth push:

“Business Connect provides the next fantastic opportunity to demonstrate how we are growing the economy. We are bringing together some of the UK’s biggest companies and investors for meaningful dialogue – and I’m a Prime Minister passionate about working with business to unlock opportunity and progress.

“Since taking office, I’ve spoken to over 1000 business people – because they are the innovators and change-makers at the heart of our economy, supporting jobs, attracting investment and driving growth.

“The UK can be proud of its business credentials. Through the creation of 162 tech unicorns, smarter regulation and world-leading universities – we’ve got the right ingredients to double down on growing the economy.”

But…. the IMF fears the UK will shrink 0.3% this year, putting it at the back of the leading G7 countries….

A chart showing IMF growth forecasts