The Crisis at the CBI

The principal representative organisation of British business, the Confederation of British Industry (CBI) was recently plunged into crisis following allegations of sexual harassment and a toxic culture. The director-general, Tony Danker, was dismissed, while the president, Brian McBride, said that he would step down early. The government stopped engaging with the CBI and it suspended all its activities until June 2023.

There are deeper structural problems in British business representation which were discussed in a Political Quarterly special section. These can be dated back to the late 1960s when the CBI decided to become a de facto confederation of British business by admitting retailers and other non-manufacturing firms as full members, which diluted the CBI’s voice as a spokesperson for manufacturing.

The CBI, whose income was £25 million in 2021, claims to speak for 190,000 businesses. But the number is boosted by the fact that it has a hybrid membership model made up of individual businesses and trade associations. Globalisation has challenged domestic forms of business representation such as those provided by the CBI. However, countries are returning to more protectionist policies and a greater use of subsidies, while Brexit has also created new problems.

Leading firms resign

Following the revelations of serious misconduct, a number of leading firms resigned, including Aviva, BMW, Jaguar Land Rover, John Lewis, Mastercard and Vodafone. When the CBI lost around 30 per cent of its membership (disproportionately larger firms who paid higher fees), it was suggested that many as a third of staff might have to be let go. This would undermine the in-depth expertise that the CBI claims is one of its greatest strengths.

The CBI’s principal focus is on issues of macroeconomic policy such as taxation and growth. It claimed to have had a substantial influence on the development of the furlough scheme during the Covid pandemic and the additional help for childcare announced in 2023. Critics of the organisation claimed that it was not missed during the period that it was out of contact with government, but this was not really long enough to make a balanced assessment of its worth. With a general election likely in 2024, there was a renewed need to engage with the government and the opposition to influence policy development.

The British Chambers of Commerce (BCC) saw the troubles at the CBI as an opportunity to increase their influence. BCC is regionally based, whereas the regional structure of the CBI is relatively weak. CBI has always been the more influential lobby in Whitehall and Westminster, although the BCC has enjoyed some influence.

In June 2023, the BCC announced that it was launching a new Business Council for large companies looking for a different form of representation, which would focus on issues facing the UK economy in the run-up to the next general election. Meanwhile, in the run-up to a CBI extraordinary general meeting called for June 2023, Microsoft and Siemens led a successful effort to shore up support for the CBI. The government’s relations with the CBI initially remained frozen. In the longer run, contact is likely to be resumed, but its intensity and level will be a test of the continuing relevance of the CBI.

Is the CBI necessary?

Is there need for an organisation like the CBI and, if so, what should it look like? Very large businesses have their own direct links with government and many of them have their own specialist government relations divisions. Government does, however, need an aggregated business view on a range of issues, including, for example, how one might regulate artificial intelligence. All major European countries have an organisation that functions as a CBI equivalent. Furthermore, Labour evidently intends to pursue a more systematically interventionist industrial policy if it returns to office and this will necessarily involve a dialogue with business.

It is useful to revisit what government derives from a structured dialogue with business. Governments want a successful economy to build electoral popularity and generate the funds to improve public services without placing an increasing burden on individual taxpayers. They need to listen to business suggestions regarding investment, skills, and the productivity problem. The CBI can provide expert understanding of economic and social issues to underpin such suggestions.

The CBI has always claimed to represent smaller businesses as well, although in fact there are a number of conflicts of interest between larger and smaller companies. It could be argued, however, that the Federation of Small Businesses has done a more effective job of representing the distinctive interests of smaller firms than has the CBI. If anything, divisions within business have increased over time, making it more challenging to have an organisation that represents business as a whole, without reverting to lowest common denominator positions.

Energy policy is a case in point. There are serious tensions between energy suppliers and energy intensive industries. Companies display a spectrum of responses to net zero, ranging from serious attempts to develop effective policies through ‘greenwash’ to a focus on short-term profits regardless of the environmental cost.

Conclusions

The risk that faces both government and the CBI is of a ‘hollowed out’ organisation with a less comprehensive membership, fewer staff and less authority with government. It would stumble on as a weakened shadow of its former self. Overall, there is still a need to try and aggregate an overall business viewpoint. If the CBI ceases to exist, one would have to reinvent it, but it would be difficult to predict what a successor body would look like or whether it would do a better job. Therefore the representational capacity of British business may have been permanently weakened by recent events.