Wisdom from the President of the CBI

Helen Alexander, the president of the Confederation of British Industry (CBI), spoke at the University of the West of England (UWE) last week. What news does the CBI have for us about the state of business? Where are things going? What should we look for when we vote on the 6th May? What do you think?

Last week I was lucky enough to hear Helen Alexander, President of the CBI speak at the UWE Bristol Business School. Helen spoke for twenty minutes before opening the floor to questions and answers. Helen left The Economist, the bastion of “Free Markets”, on 15th July 2008 after 22 years and is now a president of the CBI, non-executive at Centrica and Rolls-Royce and adviser to Bain Capital, the private equity group. Clearly she is a very successful, experienced and politically independent person and someone we should listen to. Her knowledge from the members of the CBI, managing the Economist and inside the board rooms of major UK companies means she knows what is happening in the real world across all sectors.

What struck me was the disconnect between what I observe (i.e. word on the street and economic indicators) and the views of the CBI as Helen reported them. In the first part of her talk, she said that the CBI reports that its members indicate that 1. the recession is definitely over; 2. NICE is over (Non Inflationary Constant Expansion); 3. inflation will not be an issue in the future;  4. growth will continue at 1% pa.; 5. training budgets are not being cut; and 6. we should expect more government intervention in business in the future. In fact, Helen went as far to say that we’ll look back in a year’s time and wonder what all the fuss was about… we’ll be amazed that people were so concerned about the future. There really is nothing to be concerned about!

My view is slightly different. Six months ago, my view was that we were in for a “double-dip” recession and that the second dip will happen in the autumn, after the general election and first emergency budget. Nothing I have seen has changed my view. In fact, economic indicators seem to back it up. Six months ago, those I spoke to generally didn’t agree. Two months ago investors and financial people started to agree. My attitude is to prepare for the worst and hope for the best.

Apart from being self contradictory (i.e. saying NICE is over but expect a period of low inflation and constant, if lower, growth) the view from the CBI needs some explanation. I can only think of the following explanations:

  1. I am wrong. That I (and those I speak to, financial commentators, etc.) are wrong. Always a possibility. I certainly can’t claim to be right every time I try to predict the future.
  2. Companies are lying. CBI companies are being less than truthful when answering surveys. Organising this would be challenging so I don’t think this is very likely.
  3. Incorrect reporting. The CBI is not correctly reporting responses to their surveys. Perhaps they have their own agenda?
  4. Surveys are skewed. The CBI membership is not representative of businesses as a whole and this could be skewing the result. For example, SMEs are under-represented.
  5. Reporting hope. That is, we are hearing what we would like the future to be (not what we expect the future to be). If we talk it up enough, then perhaps it will be OK.
  6. She was talking to the masses. In other words, those in the know are tells us what they want us to believe while keeping the real story to themselves.

Is there another explanation? Which would you choose?

The disconnect between reality and what we are being told by “those that know” has come to be what I expect. However, the assertion that the government will step in and be more interventionist is of greater concern to me. Every time the government steps in to “fix a market failure” more problems are caused for legitimate businesses than are solved. It gets harder for someone to start a business up. Fewer start-up businesses eventually results in fewer larger businesses which will generate revenue for the UK on the world stage.

What can be done? Vote for the party that champions less red tape, less regulation and more freedom. Any ideas who might be offering this package? I’d welcome your views.

This Post Has One Comment

  1. I would tend to the view that it’s a combination of 4,5 and 6.

    It also could be heavily influenced by how the survey was conducted and how the questions where asked.

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