What do business leaders want from the next prime minister?

The final Con­ser­v­a­tive lead­er­ship hope­fuls will face off in anoth­er vote lat­er today as the par­ty seeks to find a replace­ment for Boris John­son in 10 Down­ing Street.

Rishi Sunak is the cur­rent favourite among fel­low Con­ser­v­a­tive MPs with 118 votes, and his expe­ri­ence in the Trea­sury may be seen as an asset among busi­ness lead­ers who list infla­tion and the econ­o­my among their top con­cerns.

Accord­ing to a sur­vey from the Fed­er­a­tion of Small Busi­ness­es (FSB), 89% of small firms say oper­at­ing costs are up this year com­pared to last, with the ris­ing cost of fuel and util­i­ties con­tribut­ing most to this increase.

FSB nation­al chair Mar­tin McTague claims that its mem­bers are look­ing for a prime min­is­te­r­i­al can­di­date that is “unequiv­o­cal­ly pro-busi­ness, pro-growth” as he warns, “growth can’t be put on hold for two months”.

He adds: “Firms des­per­ate­ly need help with the charges that hit them regard­less of prof­itabil­i­ty: busi­ness rates, nation­al insur­ance, util­i­ties, fuel and those linked to sup­ply chain dis­rup­tion.”  

Sunak is up against Pen­ny Mor­daunt and for­eign sec­re­tary Liz Truss, who cur­rent­ly have the back­ing of 92 and 86 MPs respec­tive­ly.

Tackling corporation tax

One poten­tial pol­i­cy raised by can­di­dates for reduc­ing the pres­sures on busi­ness is can­celling the pro­posed cor­po­ra­tion tax increase. This was set to go up from 19% to 25% from 1 April next year.

Both Liz Truss and Pen­ny Mor­daunt have pledged sig­nif­i­cant tax cuts in a bid to win over Con­ser­v­a­tive par­ty mem­bers, while Sunak has insist­ed he would wait before reduc­ing tax­es fur­ther. 

The Insti­tute for Fis­cal Stud­ies esti­mates that can­celling the planned rise in cor­po­ra­tion tax for big com­pa­nies would cost £17bn a year.

But head of Make UK Stephen Phip­son claims that many busi­ness­es would not see any imme­di­ate return as a result. Com­ment­ing in the Finan­cial Times, he says: “A lot of com­pa­nies would not see any ben­e­fit of cor­po­ra­tion tax cuts as they are not mak­ing any mon­ey.” Instead, the Con­fed­er­a­tion of British Indus­try says that it would like to see a focus on invest­ment-tar­get­ed busi­ness tax.

In an open let­ter to the Con­ser­v­a­tive lead­er­ship can­di­dates, its direc­tor-gen­er­al Tony Danker writes: “Invest­ment tar­get­ed busi­ness tax mea­sures avoid sig­nif­i­cant infla­tion risk as they seek to mate­ri­alise into eco­nom­ic activ­i­ty over the year ahead and beyond, rather than right now in the midst of infla­tion.”

He sug­gests that reform to busi­ness rates and devel­op­ing a suc­ces­sor to the super deduc­tion, which allows com­pa­nies to claim tax back on invest­ment, should be a pri­or­i­ty. Any changes to the head­line cor­po­ra­tion tax rate should be con­sid­ered along­side all tax­es that apply to busi­ness­es, includ­ing busi­ness rates and nation­al insur­ance.

The Insti­tute of Direc­tors (IoD), which rep­re­sents 25,000 busi­ness own­ers and board mem­bers, says that any reduc­tion in busi­ness tax­a­tion would be wel­come. But it has sug­gest­ed that any cor­po­ra­tion tax cuts could be tied to the government’s net-zero tar­get to incen­tivise more sus­tain­able actions.

Tory leadership hopeful’s climate commitments

The net-zero tar­get has been anoth­er key debat­ing point in the race for the Tory par­ty lead­er­ship. 

In the week that the Met Office issued its first red extreme heat warn­ing, the can­di­dates were asked in ITV’s lead­er­ship debate whether they would stick to the cur­rent 2050 net-zero tar­get.

All can­di­dates, except Kemi Bade­noch (who is now out of the race) com­mit­ted to the exist­ing goal. Sev­er­al answers, though, came with caveats.

Sunak warned that “if we go too hard and too fast, we will lose peo­ple”, while Truss said any cli­mate change action shouldn’t harm peo­ple and busi­ness­es and promised a mora­to­ri­um on the green levy.

In response to spec­u­la­tion that a new PM could seek to change the UK government’s net-zero com­mit­ments, the IoD’s senior pol­i­cy advis­er Alex Hall-Chen says: “Devi­at­ing from the UK’s exist­ing emis­sions com­mit­ments and under­min­ing its glob­al lead­er­ship on this issue would be desta­bil­is­ing for UK busi­ness.”

Tory min­is­ter and COP26 pres­i­dent Alok Shar­ma has also threat­ened to resign if any future prime min­is­ter waters down the government’s key cli­mate pledges.

‘Business leaders would have been watching from behind their hands’

After the last round of MP vot­ing takes place lat­er today, the final two can­di­dates will vie for the votes of around 150,000 Con­ser­v­a­tive Par­ty mem­bers over the sum­mer.

It is clear that busi­ness­es want the focus of the next prime min­is­ter to be on growth and address­ing the country’s cur­rent eco­nom­ic chal­lenges.

But British Cham­bers of Com­merce pres­i­dent Ruby McGre­gor-Smith is less than con­vinced that the remain­ing can­di­dates are up to the task.

In an op-ed in the Tele­graph, she said: “We are now sad­dled with a lame-duck gov­ern­ment which can­not take the big deci­sions our econ­o­my needs.” Adding that, “busi­ness lead­ers across the UK would have been watch­ing from behind their hands”.

McGre­gor-Smith claims that the cur­rent uncer­tain­ty will “fur­ther dam­age busi­ness con­fi­dence” and called for “strong fis­cal pol­i­cy and a long-term strat­e­gy for get­ting us back to eco­nom­ic growth”.

An FSB sur­vey revealed that busi­ness own­ers’ con­fi­dence has fall­en to ‑24.7, down more than 40 points from the same quar­ter last year and low­er than the lev­el seen when the omi­cron Covid vari­ant began spread­ing at the end of last year. 

Who­ev­er takes over as prime min­is­ter will like­ly have their work cut out to restore faith among the busi­ness com­mu­ni­ty.