Government sets out plans to back British business and create "a new economic dynamismâ"
The Prime Minister and the Business Secretary today outlined the steps the Government is taking to ensure a long-term commitment to the country in building confidence and leading to economic growth and jobs.
Speaking to an audience of business leaders at the CBI conference, The Prime Minister spoke first, setting out the Government’s plans to back British business and create “a new economic dynamism”.
He announced the creation of a £200 million network of technology centres, linking university researchers with business, and the UK’s first ever National Infrastructure Plan. Speaking later in the afternoon Dr. Cable launched a review to investigate whether there are failures in corporate governance and the markets.
Investing in growth
Describing the difficulties that the country faced following the near collapse of the banking system, Dr. Cable spoke of the importance of investing in lasting economic growth.
He highlighted the need for reform which is not characterized by the lessons of the past; superficial economic prosperity based on booming property markets, low investment of industry and a dependence on banking. He addressed the question of how it could be done in a better way;
“It is partly about removing government imposed obstacles to growth: onerous business taxes, red tape which suffocates small firms, and a slow oppressive planning regime. But it is also about government doing its job properly. Doing the jobs the market does not do by itself: education and training, infrastructure provision and basic science leading to innovation.”
He went on to describe that the tough decisions in the CSR would look to the long term, such as the defence of science, the new technology centres and boosting the numbers of apprentices, but that the government had limited scope to promote growth through fiscal stimulus;
“With private consumers being so debt-laden, growth will have to come from the business sector and overseas trade. Trade and openness are crucial to recovery.
A banking sector for the future
Dr Cable went on to state that maintaining the flow of credit to good, credit worthy companies would remain central to his agenda, and asked what type of banking system did the country need in the future. He explained that the current situation, where most businesses only have a choice of 4 or 5 partners, needed to change;
“In five years time we would like a much broader choice for businesses. More banks who understand SME finance. More non-bank sources of finance. More use of equity. More specialist knowledge of sectors.”
He also emphasised the importance of investing for the long-term. “I believe that empowered, informed shareholders, investing for the long term, are good news for the companies they own. Alongside directors and managers aware of their wider duties, such shareholders provide the space vital for longer term decision-making.”
A Long term Focus for Corporate Britain
At the CBI Conference the Business Secretary launched a call for evidence on the subject of pay, corporate governance and takeovers called “A Long term Focus for Corporate Britain”.
The consultation aims to investigate issues including; the problems of short-termism, investor engagement, directors’ remuneration and - following on from last week’s announcement by the Takeover Panel - the economic case for takeovers. It also asks:
Do boards understand the long-term implications of takeovers, and communicate the long-term implications of bids effectively?
What are the implications of the changing nature of UK share ownership for corporate governance and capital markets? Whether disclosure of directors’ pay should be more transparent?
Do shareholders and investors focus too much on the short-term?