CBI takes a big financial hit

The CBI has informed members it had slumped to an £8.3mn loss last year after a governance crisis and allegations of serious sexual misconduct against some staff caused members to flee, pushing the group close to collapse. Revenues fell 12.4 per cent to £20.6mn as the self-styled “voice of business” in the UK suffered the loss of subscriptions and commercial revenues after it was forced to suspend its events and other operations for several months.

The accounts for the year ended December 2023, sent to members on Tuesday, show the CBI spent £3mn on costs directly related to the crisis, including lawyers and consultants called in to respond to the allegations and overhaul its culture and governance. It spent £729,000 on severance payments as it axed staff to stave off collapse. It had an average of 255 staff in 2022 but the number was now about 160. The group could have stemmed losses more quickly by making more economics and policy experts redundant but judged that without them it would be less useful to corporate members.

The group lost about one-third of its members during the crisis but some have begun returning, including nine FTSE 100 groups. BT, National Grid, GSK, AstraZeneca, Schroders, Phoenix Group, KPMG, NatWest, Anglo-American and Centrica have all rejoined this year.   The organisation is focusing more on across the board issues rather than ones dealt with by sector specific trade associations.

The accounts included a warning from auditors over the CBI’s ability to continue as a going concern. It remains reliant on banks to fund its operations, but its lenders were aware of its financial modelling. Revenues would fall further in 2024 because many members had already paid their subscription fee for 2023 before quitting the group, meaning the financial impact would only be felt in 2024, he added. This further drop would be offset by lower legal, consultancy and redundancy costs in 2024, he said.

The CBI is confident it can survive in the long term, but ultimately there may be some rationalisation of business representation.

The CBI in crisis

The CBI has suspended all its external events including its annual dinner after it deals with allegations of rape, sexual harassment and other misconduct at then organisation.

A number of members have distanced themselves from the CBI, some saying that they are reviewing their membership.   Of course, it could give them a convenient excuse to leave.

The allegations are being investigated by a law firm, but there are deeper structural problems at the voice of British business.

These can be dated back to the late 1960s when it decided to become a de facto Confederation of British Business by admitting retailers and other non-manufacturing firms as full members.  Although that may have boosted income as the manufacturing sector declined, it diluted the CBI's voice as a spokesperson for manufacturing.   That vacuum has been partly filled by MakeUK, formerly the Engineering Employers' Federation.

The CBI reached the peak of its persuasive power in the 1970s as a part of a tripartite arrangement for economic policy.  Its voluntary prices initiative helped to shore up the Heath Government's prices and incomes policy.  The 1974-79 Labour Government often referred to the 'Government, the TUC and the CBI' in the Queen's Speech.

As far as Mrs Thatcher was concerned, the CBI was a relic of harmful corporatism and its influence waned.  It did recover some ground under the Major Government and New Labour, but government increasingly consulted directly with leading firms, sometimes formalised in business advisory councils.

With business being overwhelmingly remain, Boris Johnson had little time for their views as he expressed with an expletive.  

Weathering this crisis and remaining a credible voice of business is going to be challenging.

Poor relations between business and government

Forty years ago I published an article in Government and Opposition on big business and the Conservative Party in which I stated, 'The basic theme of this article is that this relationship is more problematic and tenuous than is often assumed to be the case.'   More recent events appear to confirm this thesis.

The CBI likes to present itself as the voice of British business.   Its heyday was in the days of tripartite economic policy in the 1970s when it became a governing institution alongside the TUC.  Its cooperation was needed to make prices and incomes policy, the central plank of economic policy, function.  Its role is evident in the chapter on economic policy I contributed to the recent book on the Callaghan Government edited by Kevin Hickson.

It suffered a body blow under the Thatcher Government when it was seen as a throwback to failed corporatism.   Matters weren't helped when one director-general promised a 'bare knuckle fight' with the Government.   Mrs Thatcher preferred to talk to the Institute of Directors which was seen as a more resolutely pro free enterprise organisation.

Influence was regained under the Major Government and New Labour, but in some respects the organisation has been 'hollowed out' like other British institutions.   A complicating factor is that Britain is a 'company state' where direct relations between leading companies and government are often more important than those mediated by associations.

The Brexit referendum posed new difficulties for the CBI.   Most businesses and business leaders (Wetherspoons aside) were opposed to leaving, although consumer facing companies were reluctant to put their heads above the parapet.   In any event, the CBI came under fire from leavers for its stance.  This culminated in Boris Johnson being reported as saying '**** business.'

Now Boris Johnson has called in one of his Oxford pals to set up a Business Action Council.  Maurice Ostro is a little known former frozen yoghurt manufacturer.   The new body is made up of 32 trade associations.   In the past British trade associations had a poor reputation for lack of professionalism, although doubtless they have improved in a digital age.    In any case the stated aim is to help small entrepreneurs rather than big listed companies.

If a report in the Financial Times is to be believed, the organisation comes across as a something of a shambles which is no surprise when anything emanating from 10 Downing Street is concerned.   Its business is apparently conducted in half hour group conference calls and it appears to have achieved very little in seven months.

Business has been disappointed by the lack of effective engagement with government over the consequences of a no deal Brexit, but government has been trying to establish a narrative in which business gets the blame for inadequate preparation.  Either way, the relationship between government and business is as bad as it has ever been.

Lobbying: the dark side of politics?

The panel at the CAGE event in Brussels

Last week I gave a presentation on 'Lobbying: the Dark Side of Politics' at the University of Warwick's EU in office in Brussels on behalf of CAGE (Centre for Analysis of Global Economy). My presentation drew on my forthcoming 'Pocket Politics' book for Manchester University Press on the topic.

I started by pointing out that the freedom to associate is at the heart of liberal democracy and the existence of a large number of associations is a sign of a healthy civil society. Autocracies either prohibit such associations or they live a perilous existence.

Lobbies can help to avoid poorly designed policies by giving decision-makers perspectives and information they would not otherwise have, and this is particularly helpful for implementation.

However, it is important to retain a balance, although as someone said in discussion the difficult question is what that balance should be?

One thing that has to be guarded against is big business dominance, although some in discussion thought that the real risk of dominance these days was from hi tech businesses such as Amazon and Google which were almost beyond control, despite the efforts of the EU competition commissioner.

Smaller businesses are an important source of innovation and employment. One discussant argued that they were well organised in Brussels today. However, I discussed the difficulties that the emerging biocontrols industry had faced because of its lack of knowledge and resources compared with established large synthetic chemicals companies.

The need for a pluralistic political balance is one justification for regulation, but it also helps to protect the reputation of the industry. In this connection I discussed the recent Bell Pottinger affair, although that offered an example of successful self-regulation.

In many ways the EU was ahead of the curve in regulating lobbying, although there were still deficiencies. In discussion it was pointed out that there was little regulation of lobbying the Council and the whole 'trilogue' process between Commission, Council and Parliament was opaque.

In order to restore balance, the EU funds NGOs to the tune of €1.2bn in 2015, although much of this was for the delivery of development aid.

Considerable upheaval had been caused earlier in the year by the initiative of Markus Pieper (an EPP MEP from Germany) to reject funding for NGOs that oppose the 'strategic, commercial and social security objectives' of the EU. It was opposed by the Greens and the Social Democrats. The report was shelved and there is to be a special review by the Court of Auditors.

A commentator from the audience wanted to make a distinction between sectoral groups and advocacy groups. However, I think that the categorisation of the former as 'bad' and the latter as 'good' is an over simplification.

The general issues that needed to be borne in mind were:

• The legitimacy of the EU as a democratic polity
• Citizen engagement and confidence in the institutions
• The need for a balanced range of perspectives
• The reputation of lobbying