Labour’s former business backers flee 'consistently s****' Government

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After a bruising 22 months in power, only 17 of the 121 bosses who put their name to a letter declaring Labour could deliver the UK’s “full economic potential” said they still supported the government’s agenda.

Some former backers accused the government of “consistently s****” decision-making and claimed that the “wheels have fallen off.”

Their criticisms follow consecutive cost-hiking budgets, in which businesses were hit by higher National Insurance contributions and a rise in the minimum wage.

Business Secretary Peter Kyle hit back, telling LBC the economy can only “thrive” if working people have more money in their pockets, and insisted the government’s industrial strategy will stimulate billions of pounds of investment and create thousands of new jobs.

He added that the UK had the highest growth of any European G7 economy last year.

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The open letter was the crowning achievement of the party’s “smoked salmon and scrambled egg” offensive, in which the then shadow chancellor charmed business leaders with upmarket breakfasts and assurances that Labour could be trusted with the economy.

But executives previously persuaded by Labour are now harbouring doubts.

“I don’t think anyone would support Labour at this stage,” one leader, who wished to remain unnamed, bluntly told LBC.

He continued: “I very much doubt any change of leadership will improve things, as the Labour Parliamentary Party (Labour MPs) are unlikely to vote on something coherent to improve the economy.

“I put my support to Labour as we needed to find ways to make the government and economy more effective… The most disappointing thing since Labour has been in power has been the lack of talking to those who were willing to support them at the time.”

Another disappointed executive said: “I think my support has evaporated with businesses expected to pay a disproportionate amount to support an unsustainable, growing welfare state.

“They have swung from the middle ground to the left, seemingly controlled by their backbenchers, and are facilitating an increased rate in our deindustrialisation on crazy net zero policies.”

Meanwhile, Frank McKennna, the Chief Executive of Downtown in Business, which works with 800 companies predominantly across north-west England and the West Midlands, said his members were feeling disillusioned.

McKenna, who added his name to the letter, contended that the Chancellor’s Budget had shown it was operating on a “tax and spend” platform.

“Our membership feels totally let down by what they see as a flurry of anti-business policies,” he said.

“Increases in National Insurance, the minimum wage, and changes to employment law legislation have had a hugely negative impact on Labour’s stated major mission of delivering growth in the economy.

“We need leadership that can offer a plan to grow the economy, by working with, rather than against, the private sector… I would give the administration a further six months to reset and change course."

While some business leaders maintained their backing, they were far from enthused by some of the decisions taken by Sir Keir’s government.

Earlier this year, one of the letter’s signatories, celebrity chef and restaurateur, Tom Kerridge, spearheaded a campaign which prompted a U-turn on government plans to substantially increase business rates for pubs across the country.

In an interview with Andrew Marr at the start of April, Mr Kerridge told LBC he “truly believes” in Labour’s “fundamental values”, but that clear mistakes have been made.

“There are so many different things this government needs to understand about… the hospitality industry,” Mr Kerridge said. “The Treasury needs to start loosening those purse strings.”

“The biggest thing that the industry calls for is a reduction in VAT… [it would] relieve a lot of pressure if there was a reduction in VAT in line with the rest of Europe, where it sits at anywhere between 8 and 12.5%.”

The government says it's helping the hospitality industry by cutting April's business rates bills by 15%, which will be followed by a two-year freeze, as well as extending World Cup opening hours and increasing the Hospitality Support Fund to £10m.

Among the leaders we spoke to, there was an understanding that the UK is facing significant headwinds which are out of the government’s control, most notably the disruption from the war in Iran.

The UK economy was dealt a significant blow last month after it was projected to experience the sharpest cut to its growth of any major country.

According to forecasts published by the International Monetary Fund, the UK economy is set to grow by just 0.8% this year - down from a previous forecast of 1.3% growth - the biggest fall of any G7 nation.

Rachel Reeves has repeatedly expressed her frustrations about the impact of the Iran War on the UK economy, which had registered an unexpected 0.5% growth in the month before the conflict started, describing President Donald Trump’s action as a “mistake” during a trip to Washington last week.

That momentum, the Treasury fears, could be undermined by the disruption to the Strait of Hormuz.

Despite the global turbulence and scepticism from some of their previous backers, the business secretary, Mr Kyle, believes there are grounds for optimism.

He said: “This Government has the right economic plan, which is why last year we were the fastest growing European economy in the G7, and our new Industrial Strategy will unlock billions in investment and support thousands of jobs over the next decade.

"I know some businesses are facing a challenging time, which is why we are backing them through our Small Business Plan, including a £4bn access to finance boost for SMEs, taking tough action on late payments and a £4.3bn business rates support package.

"Our economy can only thrive when people have a wage they can count on, and I'm committed to improving job security while ensuring we work with businesses on what our Plan to Make Work Pay means for them."