It's Labour by a landslide

Yesteday morning the country woke up to the news that Labour has won a landslide victory at the general election.

After 14 years of Conservative rule, there is a new prime minister in Sir Keir Starmer and the incoming chancellor – a key figure for the fortunes of the economy – was announced as Rachel Reeves.

But how has the region’s business community reacted to the news?

Henrietta Brealey, CEO of Greater Birmingham Chambers of Commerce, said: “We congratulate Keir Starmer and the Labour Party on their decisive victory on a night of historical significance.

“Right now businesses across the country will be craving a period of relative stability so they can plan and invest for the future.

“Nevertheless, it’s clear the new government will be inheriting major challenges – acute fiscal pressures, stagnant growth levels, low levels of investment and a prosperity gap between the north and south of the country that shows few signs of narrowing.

“Within this context, there will be no honeymoon period for the incoming administration – businesses will need to see a clear plan of action that will drive investor confidence and prosperity from the outset.

“In particular, strong and decisive leadership will be required from the new prime minister to shift the dial on devolution, ease firm level cost pressures, harness technology to improve public services, strengthen our infrastructure networks and cultivate strong trading ties with Europe and further afield.”

Tony Hague is CEO of Walsall-based PP Control & Automation, strategic manufacturing outsourcing specialists.

He said: “There was no real surprise with today’s election result. Conservatives have paid a heavy price for many years of ineffectiveness, personified by the Liz Truss mini budget that rocked the economy and left many of us still paying the financial price. After 14 years of the same government, a change was almost inevitable. 

“In truth, the current Labour manifesto is fairly central and balanced, albeit the concern of increased taxes is always there.

“From a UK manufacturing perspective, we await with interest what positive steps they may take in the short and long-term. Some relatively easy decisions that could have a big impact, include a revised R&D policy, a review on Corporation Tax and more sustained support for SMEs around export.

“Now the election is over, we must see positive and bold action from the Bank of England, and this should start with interest rate cuts to stimulate the economy and reduce the cost of borrowing.

“Personally, I would welcome some real incentives around the housing market. If we see a strong construction sector, the rest of the economy generally follows.”

David Alcock, partner and head of social business at law firm Anthony Collins, said it was time for a new government to effectively tackle the delivery of public services.

“Many councils are experiencing financial difficulties, and the new government has an opportunity to take a step back and fundamentally rethink the way things are done,” he said.

“Local government reform must now be treated seriously and given the priority it deserves.

“The highly anticipated move to multi-year settlements for local authorities would be a promising start, but there are other avenues the new government should explore.

“For instance, there is huge scope for social purpose organisations – co-operatives, charities and other community-run initiatives - to have a much greater role in re-modelling public services.

“We are already seeing examples of communities working shoulder-to-shoulder with local authorities to provide much-valued services and deliver local regeneration projects. We need a new model of ownership for our utilities and other key services. It’s clear from this that a new, collaborative delivery model that is focused on meeting the needs of communities could work.

“It is obviously early days, but the new government must act on the findings of the Law Commission’s review of co-operative law.

“Legal reforms would support the growth of social enterprise in all its forms and enable new thinking in service delivery. The new Labour Government’s manifesto recognised the value of social enterprise and promised to double the size of the cooperatives and mutuals sector. This change must now be prioritised in the first 100 days.”

Matt Buckingham, practice lead for Grant Thornton UK LLP in the West Midlands pointed to the challenges the new government faces driving up GDP. 

“The UK is the sixth largest economy in the world and the second in Europe and, as a region, the West Midlands has plenty of strengths to build upon that will help make the most of the opportunities that undoubtedly exist in multiple sectors. 

“This is an era of profound technological change, with the advance of AI and supercomputing gaining pace all the time, while the transition to cleaner ways of living and working needs to speed up. 

“Our latest Business Outlook Tracker told us that the region’s local business community wants to see the new government focus on measures to improve infrastructure, reducing regulation and red tape and investing in skills and training, to support business growth.

“We wish the new government every success in addressing these issues and encourage it to work in collaboration with business.”

Gareth Jones is the managing director of In-Comm Training, which provides more than 2,500 apprenticeships and upskilling opportunities across its two technical academies in the Midlands. 

“To be fair to the Conservatives, they did put apprenticeships back on the map and reignite its credibility among learners, parents and employers.

“This was no small feat, but now the baton has been passed to Labour to build on this evolution and there have already been some big promises leading up to this election – widening the scope of the Apprenticeship Levy would be a very welcome move for example.

“Channelling further funding to schools to boost English and Maths standards is the right thing to do. Too often, young people leave without achieving these GCSEs and we have to step in to deliver the functional skills they require to start a pathway into vocational learning. Why should we have to do something in a short period of time that schools haven’t achieved in five years?

“The future of skills provision will be very interesting under the new Government. In recent years, capital grants and funding have been strategically available for the right projects and the right private sector providers, and this has ensured that access to training is more employer-led, impactful and delivering the skills industry actually requires.

“This must be maintained, and we can’t go back to the period where money was just given to public-owned universities and colleges.

“Going forward, Labour’s manifesto states that it will push decisions on skills spend out of Westminster and into local communities to decide what they require, presumably continuing with the theme of devolution.

“We would welcome this as long as the funding is open to the best providers and organisations and not ringfenced for the few.

“Industry requires a long-term strategy to build trust and give companies confidence to invest."

John Angus, managing director at Switch Management Ltd, is keen to explore how the new Labour government may impact the hospitality industry.   

“Labour has committed to replacing the existing business rates system with the introduction of permanently lower rates for high street businesses, including hospitality, which would be vital in reducing the financial burden.  

“I feel the new government should extend the current business rates relief scheme for another 12 months from April 2025., as it would allow hotels to continue to balance the increases in the National Living Wage and high operational costs.  

“The Labour Party’s new proposed system of business property taxation would be a welcomed change, but to truly create more growth opportunity for the industry, the new government should consider reducing the rate of VAT on hospitality, leisure and tourism back to 15%. This would help us to attract overseas tourism, which has been slow to return to the UK.  

“I would also like to see further reform on how new properties are assessed. The current planning process can lead to incorrect valuations and lengthy appeals, so we need a better commitment to response times. Pre-applications without fees would speed up the system greatly.  

“For jobs, the proposed changes to zero-hour contracts are intended to put an end to ‘one-sided’ flexibility and ensure that there is a standard level of security and predictability provided by employers. I would encourage the new government to take a nuanced approach with this policy, as there are also benefits for employees, with many hospitality workers demanding the flexibility offered by zero-hours contracts too.” 

Offering an international perspective, Lis Lewis-Jones, the founder of Birmingham marketing agency Liquid which has recently opened an office in Australia, said: “Writing this from our office in Brisbane, Australia it’s interesting to see the international reaction.

“As with so many countries we operate in, it’s an election year and they’re all facing the same global issues from a cost-of-living crisis, rising inflation, healthcare concerns and energy costs.

“With such a foundation of concerns it’s understandable that people worldwide are looking for change and for accountability, although interestingly, the UK economy is perceived internationally as being strong.  

“The Australian newsletter leads with ‘Self-described socialist, Starmer to drag country to the left. While Europe swings to the right, the UK is heading in the opposite direction. But Keir Starmer and Labour – despite their massive win – are not popular. This was a vote no, not a vote yes.’

“And while the change in government is of interest and surprise to Australians, they’re more concerned about US politics and the global repercussions a Trump administration will have.”

Many are speculating on what tax measures might be introduced by the new chancellor.

Julia Rosenbloom, tax partner at law firm Shakespeare Martineau said Labour would target “people they consider to be ‘wealthy’ rather than the average person”.

She added: “This approach may have mass appeal, but there is every chance that their tax policies will have a wide-reaching impact, with significant, negative effects for the majority of the population. If Labour fail to strike the right balance, the consequences for the economy could be damaging and long-lasting.

“A good example of this is their hard-hitting approach to non-doms. Whilst the Conservative party announced some changes to the tax benefits afforded to such individuals previously, Labour is looking to take an even harder line which, for some non-doms, might be ‘the final straw’. The number of individuals making use of non-dom tax reliefs is tiny but their contribution to the UK economy may be far more significant. Labour’s approach may see high net worth individuals pull investment from the UK, which could have a ripple effect on the wider economy.

“Labour’s rhetoric around tax avoidance during the election campaign was also extremely concerning and unfairly portrayed as solely an activity of the ultra-wealthy and those willing to take aggressive steps to avoid tax.

“In law, tax avoidance has been defined in such a way as to prevent people from taking ‘contrived steps’; in other words steps that are only taken for the purpose of avoiding tax. For example, it’s unlikely that as many people would make pension contributions or start an ISA if it weren’t for the tax benefits, and it would surely be ludicrous to say that such investments constitute “tax avoidance” - but where is the line drawn?

“While a clamp down on tax avoidance may sound like a good thing, as with any set of policies the pendulum can swing too far and impact essential tax reliefs that safeguard individuals and business owners. Labour have already promised a review of business tax reliefs, but such policies are crucial to support the already struggling economy. For example, business tax reliefs ensure that family businesses in particular are able to continue for future generations and are also a means of encouraging entrepreneurship, reflecting the financial risks that such individuals take.

“Aggressive tax schemes are largely a thing of the past, with a suite of general and specific anti-avoidance rules in HMRC’s toolbox to counter them. It is, however, crucial that the new government doesn’t attack the tax reliefs that have been established to protect individuals from being crippled by a hefty tax bill.”

Meanwhile Ranjit Dhindsa, Birmingham office leader for European law firm, Fieldfisher, has highlighted the major changes in employment law that the new government could introduce.

“Labour is expected to bring a new Employment Bill within 100 days of the Election, including a number of radical changes in relation to pay, security, inequality and discrimination. Organisations of all sizes will be affected and employers need to start planning ahead.

“On pay, the national minimum wage is set for reform with a proposal to remove the current age bands for adult workers.

“The Labour Party wants to create a single status of worker, removing the confusion between an ‘employee’ and a ‘worker’. Zero hours contracts are unlikely to be banned entirely but employers must offer regular hours after 12 weeks.

“In October a new obligation on employers to prevent sexual harassment in the workplace is coming into force. Labour has proposed strengthening this further by requiring employers to take ‘all’ reasonable steps to prevent sexual harassment.

“Dual discrimination could also be introduced, which may create up to 20 new dual protective characteristics.  For example, someone who is older and female could bring a discrimination claim based on this combined characteristic.  

“At the moment, Equal Pay claims can only be brought on the basis of gender.  This may be extended to enable different ethnic groups and the disabled to bring claims.   Labour would like to extend pay gap reporting to include ethnicity and disability, and introduce menopause action plans. 

“Flexible working is set to become a default right from day one alongside the right to disconnect outside of normal working hours.

“The right to raise collective grievances and make unfair dismissal a day one right are also under consideration. The number of disputes may increase as a result and it is unclear what the impact on probationary periods will be. 

“The law relating to collective redundancies is set to change, with Labour planning to introduce collective consultation where 20 or more employees are affected across a business.  This would cover redundancies over multi sites and different groups of employees. Employees will also have six months to bring claims rather than the normal three months.  

“In summary, Labour’s proposals will see increased employment rights, job security and flexibility for individuals, and it will be easier for employees to seek redress from their employers.  

“Employers will need to ensure legal compliance and consider how to deal with employees who will want to enforce their rights. Dispute resolution strategies may be needed.”