In all the news frenzy this weekend regarding the eurozone, a turbulent Middle East and potential union strikes, little attention has been paid to the CBI survey published on business confidence.
Perhaps it's a positive that the report has been buried, because it makes a worrying read. A third of the businesses interviewed admitted that they are looking to cut staff numbers. Three quarters said their view of the economic outlook had worsened considerably since the summer. Astonishingly, three out of five business leaders said that they planned to alter their business strategies, with 38 per cent admitting that they were going to change their staffing plans. John Cridland, the Director General of the CBI, sensibly places the blame on the corrosive effects of the ongoing euro debt crisis undermining the ability of firms to build confidence.
Interestingly, the same survey demonstrates that 82 percent of business leaders believe the Government is right to stick to its deficit reduction strategy, despite what Chukka Umunna, the Shadow Business Secretary, may preach at the despatch box. More proof, if it is needed, that Ed Miliband and his team are simply not speaking the same language as British business.
The impact of this survey should be clear for the Chancellor and his growth strategy. Policy formed and debated in the Westminster bubble has to be communicated to business leaders, not just to re-assure markets that the country remains on a clear deficit reduction plan, but to rebuild confidence among businesses, small and large.
Early fiscal measures set the right direction; by reducing corporation tax more money was left in the hands of businesses which could then be reinvested via spending on goods, services and crucially staff. However, due to a chronic lack of confidence companies don't believe extra investment will be matched by consumer demand and many firms are not using the extra money to expand in this climate. Venture Finance, having surveyed 500 SME business owners and directors, found 47% have cash reserves but are unwilling to invest it in their business because they feel the economy is too uncertain.
With an average of £190,000 in cash being held by these SME's the implications for a supply-side economic recovery is worrying. With an absence of confidence many of these firms will not be planning to invest in growth within the next 12 months, whilst understandably focusing on securing the business that they have, a strategy I remember entertaining, (but eventually discarding) in difficult times before entering parliament. The strategy of building up the bank balance whilst waiting for clearer economic horizons could fast become a vicious cycle, sending everyone back into economic stagnation.
Business, including SME's will only start exploring business growth and financial investment options if they believe the future is not bleak. This requires as much attention as do fiscal and de-regulatory measures to help the growth agenda so government must talk up the economy and highlight successes and prospects in a meaningful way. It's not enough for Ministers to don hard hats and tour factories, the Government need to engage with organisations like the CBI and Federation of Small Business to understand what the private sector is thinking and reassure them that we're on the same side, and working for growth.
We can't reasonably expect the opposition to do anything but rubbish the economy, and as much as the entire nation would like Ed Balls to abandon his 'questionable salute', it just isn't going to happen. However there is a role for Government communication, particularly by BIS and the Treasury, in securing a private sector led recovery. The Government, and the Conservatives, need to learn to sell what we are doing, not to gain New Labour-style political capital, but to shape the business climate.