'Sharp fall' in business confidence, says CBI

Land Rover assembly line Land Rover recently created 1,000 jobs at its Solihull factory, but many businesses are less confident

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Firms are reviewing investment plans after a "sharp fall" in confidence among senior business leaders, according to research by the CBI.

The CBI interviewed 122 business people and found 70% were less optimistic about the future than in August.

Two out of five were freezing recruitment or laying off staff.

The Treasury said the government deficit reduction plan had "placed the UK ahead of the curve and helped to protect businesses".

However, shadow business secretary Chuka Umunna said the findings were "deeply concerning".

CBI director general John Cridland, speaking on the eve of the organisation's conference, said it had been a year of "disappointed expectations", with the eurozone crisis adding to the problems of British businesses.

While Mr Cridland supported the coalition government's determination to cut the deficit, he urged the Chancellor George Osborne to unveil a "Plan A Plus" in his autumn statement later this month.

"We're at a critical tipping point, with the eurozone crisis reaching a crescendo and UK growth forecasts being revised down," said Mr Cridland.

"The chancellor needs to use his autumn statement to boost business confidence with game-changing new ideas," he added.

The CBI leader said the government should bring forward certain infrastructure projects, which would "leverage" billions of pounds of private sector investment.

'Heavy lifting'

"The chancellor has to announce plans for growth and the government needs to do more of the heavy lifting which is needed. There is no support for additional public spending because we think that would reduce growth rather than enhance it," he added.

Businesses gave their reasons for pessimism as the eurozone crisis, weak consumer demand, slow growth and instability in the financial markets.

But four out of five business leaders supported the government's deficit reduction plans.

Ian McCafferty, the CBI's chief economic adviser, said uncertainty about the eurozone and other factors had affected confidence and he added: "Firms are holding off taking on new staff."

A Treasury spokesman said: "The government is using every lever at its disposal to protect the UK economy and make sure that it remains a relative safe haven in the face of international instability and uncertainty in the euro zone.

"We are also tackling structural issues that will create the right conditions in the long term needed for strong and sustainable growth.

"Underpinning this is the government's deficit reduction plan, which has placed the UK ahead of the curve and helped to protect businesses and families by keeping interest rates low.

Other countries have not taken these difficult decisions and are now feeling the effect of weakened market confidence," he added.

Mr Umunna said: "Labour's five point plan for jobs and growth would get the economy moving again and boost business confidence now by bringing forward infrastructure projects, temporarily reversing the government's VAT hike to help spur the retail sector and providing a tax break for small firms taking on extra workers."


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  • rate this

    Comment number 32.

    Interesting that the CBI asked for the 50% tax rate to be cut *before* warning about a lack of business confidence. They didn't take a wait and see approach to bosses pay, did they?
    Presumably they have finished counting their nearly 50% pay rises and have now focussed on what is going on around them. Or do they expect more pay rises to 'increase their confidence'?

  • rate this

    Comment number 31.

    1930s anybody? The Keynesian approach saved the day in the US, and then there was Hitler, a product of the same era and who got the factories working in the UK and US. But if private investment can be acquired for infrastructure projects rather than public borrowing, then that could help give a kick start to the economy. But of course as we live in a 'democracy' other ideas are always welcome

  • rate this

    Comment number 30.

    Much said with tounge in cheek.

  • rate this

    Comment number 29.

    Well it's hardly a surprise is it! Even those of us without economics degrees could have predicted this. As a public sector worker facing redundancy and having just had a paycut and 3 year pay freeze my spending has been reduced to almost nothing except for essentials. And this will continue until there is some public sector stability. Where are all the new private sector jobs then Mr Chancellor?

  • rate this

    Comment number 28.

    I would be interested to know if you could name any politician of any party that had actually done anything to help the tax paying worker? Most seem to be sharing the party brain cell or none at all. When I approached my MP I was told that they thought the only way ahead was the EU and that spell lots on their grasp of the country's needs.

  • rate this

    Comment number 27.

    @ chrislabiff
    "How helpful of the CBI - talk us under (do NOT mention bread-shortages.....)."

    I seem to remember a certain chancellor who, at the beginning of the recession, when he should have been "talking up" the economy sayin "No one knows haw bad it is going to get, it might be as bad as the 30's" he then spent all the money he could lay his hands on for no benefit to anyone.

  • rate this

    Comment number 26.

    I'm sure that confidence remains high among the companies directors who recently awarded themselves a 50% pay increase. Their sterling work in boosting share prices and coming to the rescue of the economy is a lesson to the rest of us lesser mortals.

  • rate this

    Comment number 25.

    Of course there's a drop in confidence.

    Those who actually have the savvy to run a business realise that the bankers and politicians who run the circus are utterly incompetent.

  • rate this

    Comment number 24.

    Re: Post 19

    Yes I do think the HMRC is trying to collect billions in unpaid tax. I too work in a government department which is underfunded and understaffed. I suspect none of us are given the means to complete our work but work targets are increased year upon year.

  • rate this

    Comment number 23.

    re 13. Rik
    >>..we should give up on democracy...

    No, we just need a new unaffiliated centre party.

    Labour govts spend more on behalf of their sponsors (unions etc), Conservative govts make the money flow towards their sponsors (business & the rich).

    Most Brits aren't union members, in business, or rich. That's the crux of the problem with our system. The 2-party duopoly needs cracking open.

  • rate this

    Comment number 22.

    "Plan A plus",.......not a plan B then?. 'E's 'avin a larf, an 'e.

  • rate this

    Comment number 21.

    I agree with 14. These rank amateurs are playing with people's lives but have no relevant experience. Isn't it time we got subject matter experts in from industry to sort this mess out rather than wait for a bunch of public school kids to make an even bigger mess. Our patience is running very thin. They need to stop meeting and talking and make some right decisions!!

  • rate this

    Comment number 20.

    Aren't the CBI's suggestions that 'the government should bring forward certain infrastructure projects' but 'maintain the current planned level of public spending' somewhat contradictory. Or am I missing something?

  • rate this

    Comment number 19.

    #10 The Ace Face
    "The public sector is affordable, roping-in take evasion would wipeout the deficit.."

    Do you think that HMRC doesn't try to eliminate tax evasion ? It's illegal. It has been there as long as tax has. It's mostly the black economy in which a lot of people engage by 'paying cash'.

    I just left the public sector. It's not affordable and it's ludicrously inefficient.

  • rate this

    Comment number 18.

    How helpful of the CBI - talk us under (do NOT mention bread-shortages.....).

  • rate this

    Comment number 17.

    As a pensioner hit by increased taxation (we didn't get the £1000 to help - just £450) I am reviewing my budget as I have to spend less. That might be part of the trouble, as wages/pensions are squeezed so we buy less. No one wants to borrow now and so business is falling. Lots more unemployment, no jobs and confidence is low. Even business leaders can work that out shame david and George can't.

  • rate this

    Comment number 16.

    Recessions end when people say "Enough" and get on with taking small, then bigger risks to make money. Business is never a total washout, if you make new goods, you're probably having a bad time. If you refurbish and resell existing goods, then you've probably never been busier. "Talking down" snowballs, but so can "talking up" - just not as fast.

  • rate this

    Comment number 15.

    My business is doing fairly well, but it's been tough. We've been supported by the bank through all the mess but they've made us pay through the nose for it and jump through hoops too. Our main cause for concern at the moment is the lack of EU governments collective will to sort out their mess. I still think the cuts are right but it's not going to be an easy few years!

  • rate this

    Comment number 14.

    It would appear that the CBI is suggesting a more Keynesian approach to our economic woes with plan A-plus. Which makes sense unless Osborne, who does not have an economics background, misses the point. And the point is, people in work pay taxes and spend more= growth, while the opposite is true for those unemployed who become a tax burden and spend less. Now what did George study?

  • rate this

    Comment number 13.

    I think we should give up on democracy, after all, all we do is vote a group in, to do a Gaddaffi on us .. that is, to experiment with society. I now think we should go the way of the Greeks and Italians and bring in a group of mathematicians, economists, and academics to sort it all out, if it's good for them,...! Viva la technocratism. Maybe they can bring in the weathermen too?.


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