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Leaders of some of the UK’s largest companies have expressed alarm at the chaos engulfing Westminster, warning that uncertainty surrounding the Prime Minister’s future is threatening both investment decisions and the UK’s global reputation.
The markets have taken a hit with continued uncertainty around Sir Keir Starmer’s future in Downing Street with the value of the pound falling to a low not seen in more than a month on Friday.
The pound plummeted as much as 0.4% against the US dollar, before settling around 0.3% lower at 1.336 US dollars.
Political concerns added to worries over the inflation outlook amid the Iran war to send London’s blue chip share index sharply lower.
Chief executives have confided in the Financial Times that pressure on the PM to step down, the resignation of Wes Streeting, and Andy Burnham’s decision to return to parliament form a stark contrast to the stability and certainty Labour promised ahead of the 2024 general election.
‘Infighting and scandals’
One FTSE 100 chief executive claimed the government had over the past week “myopically focused on its own infighting and scandals, rather than focusing on the long-awaited action it should be delivering”.
Another chief executive said days of jeopardy for Starmer since Labour suffered dire losses in local and devolved elections amounted to a “lost week in terms of any progress on objectives”, while former J Sainsbury boss Justin King accused ministers of failing to learn “the lessons of the last years of the Conservative administration”.
“Nero fiddles . . . ,” remarked one second FTSE 100 boss, referring to the Roman Emperor who, according to legend, watched Rome burn while playing a musical instrument.
Jono Gillespie, chief executive of consumer lender Evlo, said: “It’s difficult to know how a leadership election could affect the legislative timetable, or even whether a potential new leader would want to go back to the drawing board.”
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‘Comic convention’
But Sir Martin Sorrell, executive chair at advertising group S4 Capital, said the fact that Starmer was “hanging on by his fingernails” was damaging the UK’s reputation.
“People abroad must think it’s a comic convention. Business has enough volatility already with war in the Middle East, tensions between the US and China, and Russia and Ukraine,” he added.
‘Alternatives look more destructive’
One FTSE 100 chair said: “The general view that I share . . . is that we should keep Starmer, and keep Reeves. Yes, there have been challenges and policies that are frankly anti-business but the alternatives look more destructive to the economy.”
Reiterating this view, Francesca Carlesi, chief executive of Revolut UK, whose push to gain a banking licence was backed by Reeves, said it was an “important time to maintain stability within Treasury” in order to enable the government’s “positive programme of work”.
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Theo Paphitis, Dragons Den star and owner of the Robert Dyas and Ryman retail chains, slammed the prospect of Labour MPs who were “totally inexperienced, naive in business and ideologically overqualified . . . catapulting themselves into the top job in the country”.
“If the government is even more left-leaning, then it will create nothing but mayhem,” added Paphitis, noting that he switched from the Tories to Labour at the last election “because of the psychodrama”.
Sir William Sargent, chair of visual effects company Framestore, who was one of the business leaders who signed a letter backing Labour before the election, expressed his dismay at the situation.
“The UK is throwing away its opportunity to be a haven of political stability, a leader in the development of new AI-driven economic growth,” he said.
“I am disappointed at what the 2024 election offered as an opportunity.”
Steve Rigby, chief executive of tech company Rigby Group, cautioned against “further regulation and further increases in minimum wage”, which business has said has led to cuts to headcount since Labour took office.
“We need to ensure life isn’t sucked out further from the economy and for the government to realise that it needs business and its investment to deliver growth,” he added.
‘Stop fighting among themselves’
Brian Duffy said businesses wanted the ‘party in charge to stop fighting among themselves . . . and to get on with delivering what they set out in their manifesto’.
Brian Duffy, head of FTSE 250 retail group Watches of Switzerland, called for “stability”, stressing that businesses wanted the “party in charge to stop fighting among themselves . . . and to get on with delivering what they set out in their manifesto”.
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Echoing the view of many business leaders, Allan Leighton, chair of supermarket chain Asda, said it was unclear if a change of prime minister “would make any difference, because it’s about the policies that fuel growth”.
He went on: “I don’t think it’s possible to have policies that restrict growth more than the current situation.”
Justin King, chair of National Lottery owner Allwyn UK, said: “A swift resolution [to doubts around Starmer’s future] is needed if businesses, domestic and international, are to have the confidence to invest to drive the growth and job creation the country desperately needs.”