Labour Faces Challenge to Win Back Business Support
As the Labour Party conference 2025 approaches, Prime Minister Sir Keir Starmer and Chancellor Rachel Reeves face a critical task: restoring confidence among UK business leaders. Before the 2024 general election, Labour positioned itself as “the natural party for business”, with Reeves promising it would be the “most pro-business government” the country has ever seen.
Several high-profile figures, including billionaire John Caudwell, switched their support from the Conservatives to Labour, joining around 120 business leaders who urged the party to collaborate with the private sector for the UK’s economic growth.
Post-Election Policies Shake Business Confidence
However, Labour’s actions after taking office have raised concerns in the business community. The government signaled tough economic choices, and the recent Budget reinforced these warnings.
John Caudwell criticized the £25 billion increase in employers’ National Insurance, saying it undermined goodwill built during the pre-election charm offensive:
“There was a desperate loss of faith in the business community after the last Budget. Certain measures, like employer NI, hit large low-wage employers particularly hard.”
In addition, the National Living Wage increased by 6.7%, with a 16% rise for 18-20-year-olds, placing further strain on businesses.
Small Businesses Feel Forgotten
Many small business owners also report declining confidence. Rachel Carrell, CEO of Koru Kids, one of the original signatories supporting Labour, emphasized the urgency:
“I wouldn’t sign that letter today. The government has three or four years to rebuild trust, but action needs to come quickly.”
Similarly, Mark Brearley, owner of a trolley and tray manufacturing business in Peckham, London, expressed frustration:
“High-growth sectors get attention, but traditional businesses like ours feel overlooked. Rising business rates and new employment protections make investment risky.”
The Employment Rights Bill, introducing stronger protections for employees from day one, is also influencing hiring decisions.
Mixed Signals From Economic Indicators
While anecdotal evidence shows declining confidence, official indices paint a mixed picture:
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The Institute of Directors’ confidence measure shows a significant post-election drop.
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Lloyds Bank’s confidence survey indicates stronger future optimism.
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Other measures, including ICAEW and S&P PMI, remain cautious.
Additionally, job vacancies have declined, with 150,000 fewer staff on payrolls since the last Budget, particularly in the hospitality sector.
Investment and International Recognition
Despite domestic concerns, Labour has attracted major international investment. Tech giants such as Apple, Nvidia, and Microsoft have pledged significant investments, and Scottish Power announced a £24 billion UK expansion.
Keith Anderson, CEO of Scottish Power, praised Labour’s reforms:
“By addressing planning barriers, the UK has become Iberdrola’s largest global investment destination.”
Rain Newton-Smith, director general of the CBI, also acknowledged Labour’s strong international economic engagement, though she stressed the need for effective domestic delivery.
The Road Ahead
Business confidence remains a key driver of UK economic growth and is essential for funding public spending on health, defense, and welfare. Labour’s challenge at the conference and upcoming Budget is to restore trust, encourage investment, and demonstrate that the party can balance fiscal responsibility with business-friendly policies.
