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Business Confidence

Volume 801: debated on Tuesday 28 January 2020


Asked by

To ask Her Majesty’s Government what assessment they have made of the Confederation of British Industry’s Quarterly Industrial Trends Survey, published on 22 January, and its findings on business confidence.

My Lords, my noble friend is right to draw attention to the latest survey by the CBI, which shows a sharp increase in business optimism from minus 44% to plus 23%, the largest increase on record. Although we should always be careful not to overinterpret a single survey result, this brings business confidence back to its highest level since April 2014. It coincides with the recent withdrawal agreement, providing the clarity that businesses needed during the transition period until December 2020.

Does my noble friend the Minister agree that such a dramatic increase in business confidence would normally be expected to be followed by an increase in capital investment in those businesses, an increase in employment and general improvement in the standards of the economy?

The noble Lord will not be surprised to know that I agree with him on those points. It is important to stress, as Dr Johnson once said:

“Self-confidence is the first requisite to great undertakings.”

Now that we have a situation where that confidence can grow, we are already in a good place. We already have record levels of employment and record levels of unemployment; we already have faster growth anticipated in our country than in Germany, Japan or Italy; we already see the signs whereby we can begin those great undertakings.

My Lords, it is not all sweetness and light, as the noble Lord would wish us to see. The report to which the Question refers also carries a health warning, which the Government should listen to. I am sure the Minister will have read it carefully and will have a response, but can he give specific answers to the core points raised later in the report, which goes on to state:

“the sector is not yet out of the woods in terms of performance, which means that this optimism could prove to be short-lived unless the government … help address underlying issues holding back manufacturers”?

The list is long, but it includes addressing skills shortages and improving productivity. We have been told to expect government action on sustainability and climate change—indeed, we are anxiously waiting for that—but what practical steps will the Government take to address skills shortages and to increase productivity, which is now more than 30% behind that in the US and around 10% to 15% behind that in Germany?

The first thing to note is that the report is positive, and the CBI has not always been the most positive in its analysis of the Government’s activities. Secondly, we have anticipated a number of the issues which the report has flagged up, not least productivity and investment in SMEs. In the calendar year ahead, we shall look at how to move these areas from where they are now to help them grow. I am tempted to cite Chauncey Gardiner on the notion that as long as the roots are still in the soil then all will be well in the garden. That might be a little optimistic because the year ahead will be a challenge, but the same thing is true: we have opportunities ahead which will do us well.

My Lords, the Minister is right to be slightly more cautious than the questioner on the status of this data, because I am sure that he knows that the Society of Motor Manufacturers and Traders, for example, will publish its monthly statistics on Thursday. Undoubtedly, although we do not know what the numbers will be, they will be massively less than the record numbers for what they were able to build in this country some time earlier. Given what the Chancellor has said about regulatory alignment, how much confidence or optimism can the automotive industry have that its supply chains will still be operating this time next year?

I do have confidence. I am wearing my summer suit right now, but I also have an umbrella. Looking to the year ahead, it is important to recognise that some serious negotiations are to be done to ensure that the supply chains work. That will be part of the approach in the ongoing negotiations which will benefit both sides.

My Lords, does my noble friend not agree that this news from the CBI is very welcome and proof positive that it has been consistently wrong in its predictions of gloom and doom arising from our decision to leave the European Union? Is it not the case that that confidence has come because of the leadership provided by the Prime Minister?

Is it not also the case that the questions and jeering from the other side of the House, with its continuing sniping, are not in the interests of this country, and that it is time we all pulled together in the interests of UK Ltd?

My noble friend is of course entirely correct. As long as we are all pulling on the rope in the same direction, we can achieve great things. Even the CBI appears occasionally to be pulling on the same rope.