A viable Labour Government and business risk

By Mark Glover

There is no doubt that under Keir Starmer the Labour Party is slowly moving nearer to power. Whilst by no means favourites to win the next General Election, the moderating influence of the new leader and his shadow cabinet leaves voters less inclined to vote against him. If Starmer can combine this with an attractive policy package to the electorate and a drop off in support for Boris Johnson’s Conservative Party, then it will become easier to accept in the minds of many voters that Labour is a party that could form a Government, a position most electors couldn’t imagine happening under Jeremy Corbyn.

However, whilst Labour is moderating its policies, this is not uniform across all policy areas and those policies that remain therefore have a far greater chance of being enacted. Which are the policies that business should be concerned about?

I think top of the agenda is the business policies of Ed Miliband and the shadow BEIS team. Ed, though lacking the enthusiasm for the industrial state ownership of a John McDonnell, does believe that that capitalism as it is, cannot just continue post-COVID-19 as it has in the past. He is a fan of purposeful business, which I take to mean businesses that can demonstrate positive societal contributions, and believes that the time is ripe for reform. There are a number of things he is considering, highlighted in a recent Financial Times article of the 2nd of February this year to which business may wish to pay attention.

First, Miliband seems to be keen to champion worker representation on boards.  One of the key concerns of this which I have heard from both the business and union side is that workers on boards find it difficult to balance the interests that they represent – are they there to be the voice of workers to the board or to present the board’s wishes to the workers? This lack of clarity can actually weaken the influence of good union/business relationships and is therefore seen by many as a weakness of the approach.

Miliband is a critic of the short-term nature of shareholder capitalism in the UK and would like to incentivise more long-term wealth creation. This may well mean diluting the impact of short-term shareholder pressure at a board level and adopting other more long-term indicators as to the successful performance of a company. There is definitely a wider feeling in Labour that the shareholder has the monopoly on power and that the interests of other stakeholders need to be considered, such as local communities, the environment and workers. How this thinking could impact on the ability of companies to raise finance is something that may worry CEOs.

Finally, although state ownership has lost its main proponents within the Labour Shadow Cabinet, it is still Labour’s formal policy across a wider range of utilities and there will be a lot of noise at the Annual Labour Party Conference from both Corbyn loyalists and some of the more moderate unions who see it as the simplest route to higher wages from those employers to tie Starmer to this policy. It will be pointed out that opinion polls showed widespread public support for the nationalisation of many utilities.

Business needs to keep an eye on this debate – assuming it is off the table would be very unwise. If Labour’s policy evolves away from state ownership as a solution to perceived underperformance in several prominent utilities, Labour will need to replace it. This could entail tougher regulators, state-backed competitors in their markets and the perennial wish of the Labour Party to see a rise in cooperatives and worker-owned businesses. Shaping this will require those private businesses to demonstrate clearly and effectively that they are the best way of providing customer value – and that their corporate governance arrangements are taking account of long-term stakeholders over and above the short-term interests of shareholder investors.