| CBI: Darling, we cannot go on like this |
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| Wednesday, 21 May 2008 | |
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The UK must not talk itself into a recession in the wake of the credit crunch, the CBI warns.
Provided the right decisions are made, the economy is strong enough to weather the storm, the CBI’s president told Alistair Darling at its annual dinner on Tuesday. The Chancellor of the Exchequer was guest of honour at the Grosvenor House Hotel for a dinner attended by 1,600 business leaders and guests. Reality check Martin Broughton – also chairman of British Airways – said that, whilst there were excesses, and although some investments will have to be written off, the credit crunch is not a catastrophe, but a "reality check". To ensure the economy remains strong, the government must avoid the temptation to treat business as the "fall guy" for the credit crunch through more taxes or rushed regulation, Broughton warned. He added that companies must help the government by continuing to show leadership on issues like climate change, staff training and corporate rewards. "If we wanted to talk ourselves into a recession, it would not be hard to start the conversation," Broughton noted. He argued that the UK economy "remains robust", however, particularly outside of the City, and said: "The things that are right will see us through this crisis, as they have seen us through others before it. British business has enjoyed a remarkable period of sustained growth – and though it may be slowing it does not look like stopping. Industrial and commercial Britain as a whole is in sound financial shape." Strong business leadership Broughton welcomed recent action taken by the Bank and the Treasury to counter the credit crunch by injecting liquidity into the financial markets, saying that the biggest challenge to the economy is not a lack of capital, or of credit, but of confidence in the financial system. Urging banks not to respond to the crunch by becoming overly risk averse, Broughton added: "It is vital to the lifeblood of the economy that good business opportunities are backed and not starved of the funds they deserve. Don’t ask for the umbrellas back now it's raining – start handing the umbrellas out instead." Broughton said that there is a clear need for strong business leadership during these economically challenging times, and that it is essential that top management safeguards business responsibilities to climate change, training and education, and to keeping executive pay at commensurate levels. Cost, complexity and capriciousness While welcoming the Chancellor's decision to establish a tax forum to ensure that the UK corporate tax regime becomes more competitive, the CBI president also warned against knee-jerk or overly burdensome changes to tax, and cautioned that "regulation can create a crisis as well as fix one." He warned that what business wants from the system of corporate taxation in Britain is clarity, certainty and competitiveness, but said that instead it is getting “cost, complexity, and capriciousness." “Chancellor, in all candour, it cannot go on like this. In a world of mobile capital, and increasingly mobile labour, companies and individuals now have a choice. Not just about where to work or where to invest, but about where to pay tax,” Broughton added. He shared his concerns that the credit crunch may encourage a rise in protectionism across the globe, and called for a successful resolution to the Doha round of trade liberalisation. Value of being boring He also stressed the importance of international trade, and looked forward to the delivery of the Barrier Free Transatlantic Market agreed a year ago. Broughton pointed out that Darling was voted the most boring politician in Britain for a second year in a row only three years ago. The CBI president – who trained as an accountant - said that the value of being boring was often under-estimated – particularly by investment bankers. “For us accountants, on the other hand, being voted the most boring person in the profession for two years in succession would represent the very pinnacle of professional success. But even an actuary, I think, would agree that it is preferable to be bored than to be depressed,” Broughton added. He concluded on an upbeat note, saying, "Chancellor, these are times of grievous uncertainty in the financial markets, but these are times also of stupendous opportunity." Related articles
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