Labour’s business backers – where are they now?
Labour won the public backing of over 120 business chiefs in a letter before the election – but the enthusiasm of those executives appears to have dimmed since then. CityAM tried to track them down.
It was a letter that seemed to signal a tectonic shift in British politics when it landed in newspapers late in May.
“Labour has shown it has changed and wants to work with business to achieve the UK’s full economic potential,” read the message, written centrally by the Labour party and signed by 121 business chiefs in a show of support for Keir Starmer and his party.
“We should now give it the chance to change the country and lead Britain into the future. We are in urgent need of a new outlook to break free from the stagnation of the last decade and we hope by taking this public stand we might persuade others of that need too.”
The letter was held up as a watershed moment in Labour’s courtship of the private sector: the tide of business turning against the Tories and warming to Starmer and Rachel Reeves’s more stable and ostensibly pro-business pitch.
However, a look at the signatories in the days after its publication raised questions over just how significant this vote of confidence was. No serving FTSE 350 executives had signed. What’s more, some were existing Labour members. Some were retired. The word ‘former’ appeared a lot.
Now, five months down the line and with full clarity over Labour’s fiscal plans, many of those who came out in support are no longer as effusive as they once were.
Tom Kerridge, the celebrity chef and restaurateur who put his name to the endorsement in May, did not mince his words over Labour’s plans last week, saying they would have a “catastrophic effect” on the hospitality industry.
CityAM contacted the other 120 signatories of the letter over the past week and just 28 of the original backers appeared willing to reiterate their support for Labour on the record. Three declined to comment when asked if they remained supportive of the government, while several were keen to stress that they signed in a purely personal capacity.
Just under 90 failed to respond to multiple requests for comment. Representatives of two signatories said they were currently “uncontactable.”
Perhaps most worryingly for Labour, one prominent signatory told CityAM they felt they had been “duped” after facing pressure from party officials to sign the letter.
“I signed it, I was asked twice to sign it and I do feel stupid. We were lied to on that, they said they were pro business and they said they had changed,” the executive said, asking to remain anonymous.
“They’re not actually listening now to the people who supported them.”
Of those who stood by their decision to endorse Labour, several said they now have concerns over the direction of the government and the series of punishing tax rises laid out at the Budget.
“I went to a couple of events before the election, and listened to Rachel Reeves, and what I’m seeing now is not what I was hearing before the election,” said Nic Laurens, a former Tory councillor who runs Shrewsbury-based tool seller Severn Diamond.
“They really wanted businesses to be on board, and they were listening to what we had to say. But since the Budget date, they’re not listening.”
While Laurens said he stands by his endorsement and believes this is a “much better” government than the previous one, the party’s claims of working in partnership with business are beginning to ring hollow, he added.
“They’re not actually listening now to the people who supported them,” he said.
William Reeve, the founder of Lovefilm who now runs property start-up Goodlord, stood by his decision to sign the letter and said the government had little choice but to raise taxes on business. However, he added that Reeves’s fiscal plans went against what was previously suggested and landed on ‘working people’.
“The surprising thing about the [National Insurance hike] has been that it actually penalises low paid jobs the most. That’s not necessarily what you’re expecting out of a Labour government, and possibly that’s a slightly unintended consequence of what she’s doing,” he told CityAM.
“But I think that’s why the retail [and] hospitality industries have been probably the most badly affected by it. She insulated the public sector from some of the effect by increasing their payroll budgets to absorb the increase.”
Other heavyweight backers of the party – who did not sign the letter – have also sounded the alarm on the direction of travel since Labour’s victory.
Sacha Lord, the Mancunian entrepreneur and adviser to Andy Burnham, told CityAM the “Budget measures introduced in October have not lived up to expectations”.
“Time and again, I have emphasised that if tough policies are to be introduced, they must be accompanied by a clear, long-term strategy and transparency about how these immediate sacrifices will lead to long term benefits – not just for the economy, but for the individual business owners,” he said.
“The vague justification of ‘filling the black hole’ is simply not good enough considering the anxiety, turmoil and, frankly, near collapse of businesses that hard working people have spent their lifetimes building.”
He added that “broad policies built to cover the whole business ecosystem are ineffective” and ignore the “unique challenges” and views of individual companies.
“We have seen it time and time again in recent months – whether its private schools or the recent farmer debates – where sweeping policies built to tackle one part of an industry, usually the big companies, will only ever have a detrimental effect on smaller independents,” Lord said.
David Loewi, who chairs the Restaurant Association and runs restaurant group D&D, said in an interview with CityAM in July that Labour would be a “positive” thing for the country and the hospitality industry.
Speaking again to CityAM last week, he had changed his tune.
“I think it’s very sad. They said they were going to be a party for business,” he said.
“It seems like what they’re saying and what they’re doing are two different things. The national insurance hike will send some business over the edge.”
The comments from those previously willing to endorse the party point to the scale of concern over both the Budget and the rhetoric of Labour toward the economy and private sector in recent months.
While Reeves said her party would be the most “pro-business” administration the country had ever seen, the punishing £40bn tax bill landed primarily on private sector employers and has triggered volleys of warnings from the business community.
The retail and hospitality industries, where firms operate with huge headcounts and thin profit margins, are particularly spooked by the double whammy of a £25bn national insurance tax raid and a rise in the national living wage.
“It will not be possible for businesses to absorb such a significant increase to their cost base over such a short timescale,” a group of 79 retailers, including Tesco, Boots, Marks & Spencer and Next, warned the Chancellor last month.
In its monthly survey of business decision makers last week, the Bank of England included a new question quizzing companies on how they expected the Budget to impact their companies.
Some 54 per cent of firms said they expect to raise prices in response to the national insurance hike. The same proportion expect to lower employment, while 38 per cent of firms expect to offer lower wages than they otherwise would have done.
Meanwhile, 59 per cent said they would absorb the extra costs in profit margins. Just three per cent said it would have no impact.
Business confidence has plunged and the number of job vacancies has fallen at its fastest pace in several years, according to a survey from KPMG.
Several of the companies contacted by CityAM said the party retained their support while others said they would prefer to give the government more time before casting a verdict.
“I will judge Labour on what they achieve over five years rather than five months,” said Charles Harman, a former vice-chairman at JP Morgan Cazenove.
Iain Anderson, the Chair of H/Advisors Cicero and a former Tory supporter, was a high-profile Labour convert in the run-up to the election. He signed May’s letter, and last night told CityAM he remains “supportive of the long term approach”.
Charles Randell, the former chair of the Financial Conduct Authority, added that he “continues to support Labour” and “some tax increases were required”.
“Some of them affect me directly but I understand why they are necessary,” he told CityAM.
A government spokesperson told CityAM the government was “determined to go for growth” and “work in partnership with businesses to invest in Britain’s future”.
“That is why we are delivering our Plan for Change with investment and reform to deliver growth, putting more money in people’s pockets, as well as tackling barriers to trade and taking forward the £63bn of private sector investment announced at the International Investment Summit,” they added.
While companies across the country continue to absorb the consequences of Labour’s first Budget in 14 years, it seems unlikely that the new government would be able to convince all of their original business backers to sign a similar letter today.
That’s quite a change of fortune just six months on from the election.
Additional reporting by Lars Mucklejohn, Jennifer Sieg, Jon Robinson, Maria Ward-Brennan and Elliot Gulliver-Needham