The impact on business of Corbyn’s leadership
Jeremy Corbyn was elected as the leader of the Labour Party by a resounding majority at the weekend. While much of the focus has been on the reaction of those within political parties, especially David Cameron’s combative line on the impact on our national security, businesses, including our clients, want to know what this will mean for them, despite Labour being in opposition until 2020 at the earliest.
Corbyn has previously promised increasing corporate tax and income tax, ‘People’s Quantitative Easing’ on housing, energy, transport and digital projects and an end to austerity.
But on his ‘Corbyn for Business’ microsite, his main policies include putting SMEs on a “level playing field with big multinationals”, a small business rate freeze and a National Investment Bank to help get finance to businesses in key sectors as well as strengthen our country’s digital infrastructure. He has also said “I will stand up for small businesses, independent entrepreneurs, and the growing number of enterprises that want to co-operate and innovate for the public good.” This pro-SMEs line certainly signals disruption to the large business landscape. If so-called ‘Corbynomics’ led by hard-left Shadow Chancellor, John McDonnell, forms our economic policy from the next General Election, small businesses could be better funded, technology-enabled and more highly prioritised.
However, there was caution from Simon Walker, Director General at the IoD, that Corbyn’s policies “would undermine our open and competitive economy.” Critics also say this would lead to higher inflation and interest rates, creating volatility in the market.
Much of this remains hard to predict, but unions may feel more confidence, especially if the controversial Trade Union Bill, which plans to tighten rules on strike ballots, is defeated in Parliament. This may also apply to widely-debated Welfare Reforms, which the government may now struggle to pass. The pressure to leave the EU could mount, as it remains unclear how Corbyn would campaign on the promised referendum, and this could rally more populist anti-EU sentiment. This would concern the Conservatives, given current messages about business ‘shutting up’ about a potential Brexit. Labour could consequently recover in Scotland, with the SNP possibly working more closely with the Labour party in Westminster from now on, especially if the new leadership are more relaxed about further devolution.
What is yet unknown is the stance the Conservative government will take in response to the challenges posed to them and whether Corbyn will weaken or strengthen opposition to Tory plans. Indeed, The Times journalist, Danny Finklestein, said this is the most “extraordinary political event since the advent of the universal franchise.” With all risk, however, comes opportunity, and Westminster will have yet to fully appreciate the change of landscape posed by the new opposition. We will be closely monitoring this as events and actions unfold.