Business and government: Forget the CBI, watch the market signals

Share
Related Topics
Business everywhere is becoming more important, so how should we make sure that the voice of business is conveyed accurately to government?

Two equally unsatisfactory approaches to this problem are on display this week. One is the Formula One model. Here the politicians accept a lot of money from the business in question, trim their policies to suit its interests while insisting that there is utterly no connection between the dosh and the policy - and then give the money back in case anyone thinks there was.

The other is the CBI model. Here the key grandees of business get together and decide on a policy, in this case that European Monetary Union is basically a good idea. They then stand up at a grand annual conference and say so, only to find that other key grandees think it isn't a such good idea at all, and they also stand up and put the opposite line. The disagreement then stirs up a string of anti-CBI comment, with people pointing out that it happens to be German and Irish grandees that think it is great idea for Britain to join EMU, while the British ones are altogether more circumspect.

There is a deeper problem here, which is that the business world has become much more fragmented than it was even 10 years ago, so that creating a mechanism to represent its interests is virtually impossible. We have the CBI which is competently run and does as a good job as it can representing big business. But the big companies that dominate it are becoming less and less important as a source of employment in this country. Companies such as British Airways or Barclays Bank are busy cutting their labour- forces. That is not a criticism; merely an observation that big business everywhere is involved in a ferocious drive to cut costs and that means killing jobs.

By contrast net job creation in this country comes entirely from tiny companies, the sort of companies that make Formula One cars or supply services to the business. If you run a firm with half a dozen employees you are not going to want to spend time on a CBI committee, even if that was your idea of fun.

There are other organisations that represent small business. There is the Institute of Directors, for example, which usually takes the opposite line to the CBI. But it is more of a club, with posh premises on Pall Mall, and a service industry (conferences, a magazine, meeting rooms, etc), than a lobbying body. There are various other bodies that try to represent small business, and there are the Chambers of Commerce, but it is very difficult for them to convey a clear signal: there is too much background noise.

There are an amazing number of small businesses in this country. Back in 1980 there were 2.4 million small businesses in total in Britain. Now there are more than 3.7 million, though that is down a touch from the peak of the 1980s boom. Companies with fewer than 50 employees employ nearly 10 million people, of which 2.9 million are self-employed. Where these people have a collective interest in an industry their interests can be protected by an energetic champion, with access to the corridors of power. A meeting at Number 10 and, hey presto, policy changes.

There are still dangers lurking even when there are such champions. The fragmented fine arts business in London is in danger of losing business to New York if the government agrees to an EU rule that it has to apply VAT on the auction trade. But at least there are powerful people in the salerooms who can convey the warning to government, pointing out that the Treasury will actually lose revenue, not gain it, if it drives the trade offshore.

But those are exceptions. Most small businesses do not have powerful champions. Not only is there no Federation for Creators of Web Pages on the Internet, but there is no Mr Internet (as there is a Mr Formula One and a Mr Unilever and a Mr BMW) who can hob-nob at Number 10. We have structures that represent big business in a world where power is shifting to small business.

So what is to be done? Well, I know what is not to be done, which is to create some additional formal mechanism for trying to convey the views of business to the government. The sort of people who want to sit on committees are not the people who matter in small businesses: people who are any good are too busy doing their jobs.

No, I suggest that government should not listen to what business people say but watch what they do. The market will signal pretty fast if government adopts a business-unfriendly policy. Do not over-plan, but respond very quickly to market signals.

This is the strategy of the City of London. There has been no long-term plan that sought to make the City the largest producer of international financial services in the world. We have not bribed foreign banks to locate in London, as we have the Koreans to set up plants in South Wales; yet there are more banks here than any other place on earth and we seem, if anything, to be gaining market share in financial services, rather than losing it. Whenever there is a threat, then there has to be an immediate response: a good example was the "ring of steel" round the City in response to IRA bomb attacks.

This must be the right response to the needs of business. Do not waste energy having long meetings with people who claim to represent business, for they will represent the interests of - if not large business, certainly existing business. Instead, watch with lidless eyes what is happening to small business creation and employment. Do not worry if business people moan, for everyone whinges these days. But if they start to shut down or lay off staff, or simply don't start businesses in the first place, move like the wind to find out why and correct the policy that has caused the problem. Policies which cannot easily be reversed (such as EMU membership) need to be approached with particular caution.

This is a whole new world for politicians. Politicians are used to bureaucracies, to structures, to meetings. To deal with the growing, new businesses politicians have to behave not like bureaucrats but like entrepreneurs. They have to create policies, test them on the market and see if they walk off the shelves. They have to accept that they will make mistakes and if they have a duff idea, change it fast. Being business-friendly is not the same as being friendly with business people, for it is the business people of the future who hold the key to the success of economies, not those who have already made their pile.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Bookkeeper

£23000 - £26000 per annum: Recruitment Genius: This small, friendly, proactive...

Recruitment Genius: Photographic Event Crew

£14500 - £22800 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Software Developers - .NET / ASP.NET / WebAPI / JavaScript

Negotiable: Recruitment Genius: A Software Developer is required to join a lea...

Austen Lloyd: Corporate Tax Solicitor - City

Excellent Salary: Austen Lloyd: A first rate opportunity to join a top ranking...

Day In a Page

Read Next
 

After Savile, we must devote our energies to stopping the child abuse taking place now

Mary Dejevsky
A ‘hugely irritated’ Sir Malcolm Rifkind on his way home from Parliament on Monday  

Before rushing to criticise Malcolm Rifkind, do you know how much being an MP can cost?

Isabel Hardman
HIV pill: Scientists hail discovery of 'game-changer' that cuts the risk of infection among gay men by 86%

Scientists hail daily pill that protects against HIV infection

Breakthrough in battle against global scourge – but will the NHS pay for it?
How we must adjust our lifestyles to nature: Welcome to the 'Anthropocene', the human epoch

Time to play God

Welcome to the 'Anthropocene', the human epoch where we may need to redefine nature itself
MacGyver returns, but with a difference: Handyman hero of classic 1980s TV series to be recast as a woman

MacGyver returns, but with a difference

Handyman hero of classic 1980s TV series to be recast as a woman
Tunnel renaissance: Why cities are hiding roads down in the ground

Tunnel renaissance

Why cities are hiding roads underground
'Backstreet Boys - Show 'Em What You're Made Of': An affectionate look at five middle-aged men

Boys to men

The Backstreet Boys might be middle-aged, married and have dodgy knees, but a heartfelt documentary reveals they’re not going gently into pop’s good night
Crufts 2015: Should foreign dogs be allowed to compete?

Crufts 2015

Should foreign dogs be allowed to compete?
10 best projectors

How to make your home cinema more cinematic: 10 best projectors

Want to recreate the big-screen experience in your sitting room? IndyBest sizes up gadgets to form your film-watching
Manchester City 1 Barcelona 2 player ratings: Luis Suarez? Lionel Messi? Joe Hart? Who was the star man?

Manchester City vs Barcelona player ratings

Luis Suarez? Lionel Messi? Joe Hart? Who was the star man at the Etihad?
Arsenal vs Monaco: Monaco - the making of Gunners' manager Arsene Wenger

Monaco: the making of Wenger

Jack Pitt-Brooke speaks to former players and learns the Frenchman’s man-management has always been one of his best skills
Cricket World Cup 2015: Chris Gayle - the West Indies' enigma lives up to his reputation

Chris Gayle: The West Indies' enigma

Some said the game's eternal rebel was washed up. As ever, he proved he writes the scripts by producing a blistering World Cup innings
In Ukraine a dark world of hybrid warfare and murky loyalties prevails

In Ukraine a dark world of hybrid warfare

This war in the shadows has been going on since the fall of Mr Yanukovych
'Birdman' and 'Bullets Over Broadway': Homage or plagiarism?

Homage or plagiarism?

'Birdman' shares much DNA with Woody Allen's 'Bullets Over Broadway'
Broadchurch ends as damp squib not even David Tennant can revive

A damp squib not even David Tennant can revive

Broadchurch, Series 2 finale, review
A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower: inside the mansion of Germany's 'Bishop of Bling'

Inside the mansion of Germany's 'Bishop of Bling'

A Koi carp breeding pond, wall-mounted iPads and a bathroom with a 'wellness' shower