With the UK Government’s budget delivered on Wednesday, the Chancellor of the Exchequer has not only redefined the deficit rules somewhat, but also some of the wording of Labour Party’s election manifesto. Whilst a redefinition of public debt rules may well make sense, doing so at this moment in time has not convinced everyone. Nonetheless, any increase in debt, whether it is used for consumption or investment, will need to be repaid. Like in business, we should not forget that most investments, even in infrastructure, only have a limited life span in their ability to create future economic or societal benefits.
In the Labour Party’s manifesto it was promised not to increase taxes on working people but raising employers’ National Insurance Contributions is a tax on “work” and thus might not only have an influence on cost competitiveness and employment levels but also on potential future wage increases.
Our recently conducted survey in the German-British business community revealed that many businesses believe that the UK government should focus on improving UK-EU relations by removing growth-impeding trade barriers. A further priority for businesses, is the implementation of active measures, which will foster growth. The measures include making the UK regulatory environment more competitive, supporting “future” industries, as well as increasing investment in infrastructure, research, and skills. However, the survey’s participants did not prioritise keeping the public debt “under control” in the same way as the above-mentioned factors and therefore, the Chancellor may well be forgiven for stretching the rules and promises in yesterday’s budget. In return, our community will hope that the government delivers on growth relatively quickly.
Ultimately, a clear vision with credible strategies is critical to giving businesses the confidence in the medium term future of the economy, so that in turn they continue to invest in Britain. We hope that Sir Keir Starmer’s government will deliver on these ambitions, especially as these could serve as a template for Germany, where a clear vision with convincing strategies for economic growth appear to be in even shorter supply.
Dr Ulrich Hoppe
Director General
German-British Chamber of Industry & Commerce
