finance

Javid seeks to placate business over post-Brexit rules


Chancellor Sajid Javid on Thursday softened his tone on the landscape for corporate Britain after Brexit, telling business leaders in Davos that he would not seek to move UK regulations away from those in the EU “for the sake of divergence”.

Mr Javid said the government would only change the rules under which UK companies operate if it “was in the interests of British business”, adding ministers would “weigh up the pros and cons” and consult with affected industries.

The conciliatory message from Mr Javid came after he used a Financial Times interview last week to issue a stern warning to business leaders to end their push for Britain to stay in lock step with Brussels’ rules after Brexit.

His comments were consistent with prime minister Boris Johnson’s vision of a UK trade agreement with the EU that involves significant divergence from the bloc’s regulatory framework covering multiple industries.

At a business leaders’ lunch on the sidelines of the World Economic Forum on Thursday, Mr Javid told company bosses there was no point in hankering after the common rules and standards of the EU’s single market and customs union.

“It’s not in our interest to be a rule-taker — that should be self-evident if you’re outside the single market and customs union,” he said.

“We want to be very clear about that . . . That doesn’t mean that we will diverge on rules just for the sake of divergence. That would be a complete nonsense.”

He also sought to reassure bosses by saying he would “never take for granted the contribution that business makes to our country”.

Most bosses were pleased with the pro-business stance Mr Javid struck, but they also reserved judgment on the chancellor’s plans.

Peter Lacy, senior managing director at Accenture Strategy, said that “much needs to be done to work out the practicalities [of the future relationship between the UK and the EU]. There will be many interesting trade offs and dilemmas.”

John Neill, chairman of Unipart, took Mr Javid aside to tell him that nothing good would come from harming the automotive sector after Brexit given it had one of the best productivity records of UK industries.

“If the auto sector is harmed, the government will not be able to achieve any of its other ambitions,” he said after the chancellor’s speech.

Most of the company bosses nevertheless agreed with Carolyn Fairbairn, CBI director-general, that the decisive general election result — that gave the Conservatives an 80-seat House of Commons majority — was a boost to business confidence.

“There is a real sense of relief that we are moving on with a spring in our step,” she said.

Mr Javid hailed the prospects for UK economic growth, highlighting the IMF’s latest predictions that showed “the UK is forecast to grow faster this year than France, Germany, Italy and Japan”.

The IMF’s outlook for the UK economy is notably more optimistic than the consensus of independent British forecasters.

Mr Javid said that while he was chancellor, he would downgrade growth as a government objective because there was a tension between that and other ambitions that ministers had: notably to revive underperforming regions.

“We’ve been too focused simply on growing the pie without making sure that everyone got their fair share,” he added. “We didn’t focus enough on people and places. We need to fix that.”

That meant the government taking investment decisions that might not have the highest return in terms of growth, particularly where ministers sought to improve performance of some of the UK’s regions.

After seizing constituencies at the election that had long been held by Labour in northern England, the Midlands and Wales, the government is eyeing capital spending on infrastructure in these areas that ministers hope will yield much needed productivity improvements.

To an audience that has heard every chancellor since Gordon Brown come to Davos and pledge to boost productivity growth, Mr Javid claimed that this time was different.

“Political stability creates economic stability,” he said. “We have the chance to focus on the ‘hard’ problems that will make a difference not in weeks or years but decades from now.”

And he pledged also to reform the way government takes decisions, as he made thinly veiled criticism of his predecessor in Number 11, Philip Hammond, who was known in the Treasury as “Spreadsheet Phil”.

“We need to recognise that the decisions we make in Whitehall aren’t just lines in a spreadsheet,” said Mr Javid. “Every pound we spend needs to be shaped by outcomes that make a measurable, meaningful difference to people’s lives.”



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