(Bloomberg) — Businesses are trying to persuade the opposition Labour Party to soften its plans to crimp profits, empower workers and take privately-held assets under state control as the U.K. approaches an unpredictable general election.
After a string of nationalization pledges, party leader Jeremy Corbyn added another last month when he said a Labour government would set up a publicly-owned company to manufacture generic versions of patented medicines, cutting the profitability of pharmaceutical companies.
The comeback was swift. The Association of the British Pharmaceutical Industry said it amounted to a “seizure of new research,” while the Confederation of British Industry said the move was “desperately disappointing” and lamented a “volley of attacks” at Labour’s annual conference.
But behind the blistering rhetoric, business leaders are seeking to work with Corbyn’s top team to find areas for compromise.
“Some of what Labour is proposing, the ends they want to get to, are not that different from where a lot of businesses would like to be,” British Chambers of Commerce Director-General Adam Marshall said in an interview. “I’d like to see them reach for the carrot rather than the stick when it comes to change.”
Labour’s stance matters because most political analysts expect there to be a general election soon, possibly as early as November. While Prime Minister Boris Johnson’s Conservatives currently enjoy a two-digit lead over Labour in opinion polls, business leaders know Corbyn overcame a similar deficit in the 2017 election campaign to wipe out then Prime Minister Theresa May’s majority.
Most companies want to avoid the economic risk of the no-deal Brexit Johnson says he’s prepared to pursue. On that issue, they agree with Corbyn. But they’re also wary of the effect a Corbyn-led government might have on investors.
“Many businesses have expressed concerns to us about the policies of a Labour government,” CBI Director-General Carolyn Fairbairn said in an interview. “What we’re urging Labour to do is to keep some flexibility as they’re putting their manifesto together.”
A list of policies embraced by Labour shows why companies are concerned. They include:
Giving workers a 10-percent stake in large companiesRe-nationalizing the railwaysTaking the power grid into public ownershipRe-nationalizing the water utilitiesTaking Royal Mail Plc back into public ownershipBanning excessive bonuses for bankers
At its conference in Brighton, the party also voted in favor of a policy to take over private schools such as Eton — Johnson’s alma mater.
“Business confidence is at a critical point right now,” Marshall said. “The more businesses hear about expropriation of private property, nationalization, unprecedented overreach into the way that they are run, the more concerned they become.”
Marshall said he’d had “constructive” conversations with members of Corbyn’s inner circle and there are “points of agreement,” including on the need to boost skills, increase infrastructure spending and even expand employee ownership of companies.
“There’s a lot of businesses out there that would like to increase share schemes,” he said, referring to Labour’s plan to force companies to hand equity to staff. “Where there’s a very definite point of disagreement is we don’t want to see dilution of existing shareholders in order to do that.”
Alongside those trying to moderate Labour’s position, there are business leaders who actively embrace the party’s policies.
“I don’t think being fair to staff, to employees, is bad for companies,” Ecotricity Group Ltd. founder Dale Vince — a Labour donor — said in a phone interview. “We have to make business behave in a more responsible way towards people and the environment. There’s no harm in that at all.”
Labour Business Chairman Hamish Sandison, who acts as a liaison between companies and the party leadership, said he supports the “broad thrust” of Labour’s policies, but doesn’t always agree with Corbyn’s team. He’s pushing to ensure “there is no expropriation without compensation,” he said.
“There’s no way a Labour government would expropriate any assets or private property, whether it’s in the utilities or the private schools sector, that wasn’t with proper compensation,” Sandison said. “You’d get years and years of litigation.”
Rebecca Long-Bailey, Labour’s business spokeswoman, told Bloomberg her party would aim to create a “fertile environment” for investments in manufacturing and renewable technology, and businesses would know what to expect from a Labour government.
“We’re very clear on the elements that we want to bring into public ownership and why,” said Long-Bailey, who’s been touted as a potential successor to Corbyn. “This isn’t a free-for-all where we’ll pick random industries and decide to nationalize them because that’s what we fancy doing.”
At the CBI, Faribairn said companies want to work in partnership with Labour to achieve common aims, including reducing regional inequality, broadening the skill-set of the workforce and increasing management accountability.
But she warned there’s a risk to U.K. prosperity if the party spurns the approach.
“We would say come and talk to business in a moderated way: here are the answers that businesses have to the questions you’re asking,” Fairbairn said. “Don’t close down options, because businesses are extremely concerned and it will affect their investments and their decision to continue to play an active part in the British economy.”
–With assistance from Anna Edwards.
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