Lobby group boss calls for growth policies from Rishi Sunak
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
The boss of Britain’s largest business lobby group has warned incoming prime minister Rishi Sunak against pursuing an austerity “doom loop” which he said could lead to a repeat of the weak economic growth since the financial crisis.
Tony Danker, head of the Confederation of British Industry (CBI), said that Sunak would have to look at policies such as planning reform or liberalising immigration that might be unpopular with the Conservative party’s members.
Sunak will meet King Charles on Tuesday to be invited to form a government after Liz Truss ends her briefest of reigns at the top of the UK government. Truss had pursued a dash for growth with a radical tax-cutting “mini-budget” that resulted in financial market chaos and her resignation in less than two months.
Danker had initially backed Truss’s ambition to grow the UK economy, but he has since acknowledged that fiscal stability should be the priority. However, on Tuesday he told the BBC’s Today programme that a growth strategy remains important. He said:
The 2010s began with some austerity and were then ensued with very low growth, zero productivity and low investment. It wasn’t a successful strategy for growth.
We’re going to find out on Monday that if all there is is tax rises and spending cuts and there’s nothing in there about growth the country could end up in a similar doom loop where all you have to do is keep coming back every year to find more tax rises and more spending cuts because you’ve got no growth.
Danker argued that Sunak and the Conservatives do have tools at their disposal to boost growth even if they do not ease the fiscal taps.
If you’re going to [not cut taxes or spend on big projects] – and you must – then I’m afraid I don’t think you can hold on to those policies that would have been Conservative favourites but now result in our economy getting worse and worse if you’re not prepared to deploy them.
He said “planning permission, immigration, regulation: they become incredibly important”.
Meanwhile, the big corporate news of the morning is HSBC has reported falling profits as the UK’s largest bank put aside $1.1bn to cover possible loan losses. But those results were better than expected as higher interest rates allow it to reap higher margins on its loans.
Noel Quinn, HSBC’s chief executive, described it as “strong momentum in the third quarter” and “a good set of results”.
There was also the surprise news of the ousting of chief financial officer Ewan Stevenson in favour of Georges Elhedery, the former head of HSBC’s investment bank. More on that in a bit.
The agenda
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9am BST: Germany Ifo business climate (October; previous: 84.3 points; consensus: 83.3)
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11am BST: UK Confederation of British Industry (October; prev.: -2; cons.: -12)
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3pm BST: US consumer confidence (October; prev.: 108; cons.: 106.5)
Key events
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The UK’s FTSE 100 has dropped on Tuesday morning after HSBC’s third-quarter results appeared to disappoint investors.
London’s benchmark stock market index has dropped by 0.4% in the opening 45 minutes of trading to below 7,000 points, with HSBC the biggest mover, down by 4.9%.
Sterling has edged up by 0.1% today against the US dollar to $1.1290 – just above the level on the day of the “mini-budget” that sunk Liz Truss’s ill-fated premiership and led to Sunak’s elevation. The pound has gained 0.2% against the euro.
The CBI’s Danker also pushed back against comments on Monday by Tory donor Guy Hands that the UK was “frankly doomed” without a renegotiation of the Brexit deal with the EU.
Hands, a private equity boss who backed remaining in the EU (but quit the UK for the low-tax Channel Islands), said mistakes since the referendum in 2016 had put the UK “on a path to be the sick man of Europe”.
Danker said:
If he is right then here we are in doom loop. I just don’t think he is right. We have got in this country the potential to lead the world in clean energy, in life sciences, in AI [artificial intelligence], in fintech. We have got growth potential.
What we can’t afford this time round is a government that doesn’t do whatever it takes to unlock that potential. That is, I’m afraid, the legacy of Brexit, it is the legacy of Covid, it is the legacy of the mini-budget. Yes, we need to stabilise things first and foremost, but if we don’t have a plan for growth then I’m afraid there aren’t good outcomes in the next decade.
Lobby group boss calls for growth policies from Rishi Sunak
Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
The boss of Britain’s largest business lobby group has warned incoming prime minister Rishi Sunak against pursuing an austerity “doom loop” which he said could lead to a repeat of the weak economic growth since the financial crisis.
Tony Danker, head of the Confederation of British Industry (CBI), said that Sunak would have to look at policies such as planning reform or liberalising immigration that might be unpopular with the Conservative party’s members.
Sunak will meet King Charles on Tuesday to be invited to form a government after Liz Truss ends her briefest of reigns at the top of the UK government. Truss had pursued a dash for growth with a radical tax-cutting “mini-budget” that resulted in financial market chaos and her resignation in less than two months.
Danker had initially backed Truss’s ambition to grow the UK economy, but he has since acknowledged that fiscal stability should be the priority. However, on Tuesday he told the BBC’s Today programme that a growth strategy remains important. He said:
The 2010s began with some austerity and were then ensued with very low growth, zero productivity and low investment. It wasn’t a successful strategy for growth.
We’re going to find out on Monday that if all there is is tax rises and spending cuts and there’s nothing in there about growth the country could end up in a similar doom loop where all you have to do is keep coming back every year to find more tax rises and more spending cuts because you’ve got no growth.
Danker argued that Sunak and the Conservatives do have tools at their disposal to boost growth even if they do not ease the fiscal taps.
If you’re going to [not cut taxes or spend on big projects] – and you must – then I’m afraid I don’t think you can hold on to those policies that would have been Conservative favourites but now result in our economy getting worse and worse if you’re not prepared to deploy them.
He said “planning permission, immigration, regulation: they become incredibly important”.
Meanwhile, the big corporate news of the morning is HSBC has reported falling profits as the UK’s largest bank put aside $1.1bn to cover possible loan losses. But those results were better than expected as higher interest rates allow it to reap higher margins on its loans.
Noel Quinn, HSBC’s chief executive, described it as “strong momentum in the third quarter” and “a good set of results”.
There was also the surprise news of the ousting of chief financial officer Ewan Stevenson in favour of Georges Elhedery, the former head of HSBC’s investment bank. More on that in a bit.
The agenda
-
9am BST: Germany Ifo business climate (October; previous: 84.3 points; consensus: 83.3)
-
11am BST: UK Confederation of British Industry (October; prev.: -2; cons.: -12)
-
3pm BST: US consumer confidence (October; prev.: 108; cons.: 106.5)
