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The chair of the CBI has played down the potential impact on businesses of a rise in national insurance payments in the Budget, as annual accounts showed last year’s governance crisis pushed the lobby group to an £8mn financial loss.
A rise in employers’ national insurance payments would not be a bad outcome for companies as long as other pro-business measures “mitigate” the impact, chair Rupert Soames said.
Chancellor Rachel Reeves on Monday gave her strongest signal to date that her government would increase business taxes, but Soames said businesses would look beyond the impact of individual measures.
“I think when businesses look at the Budget, they’re going to look at it in the round,” he told the Financial Times.
Businesses do not want higher national insurance on top of a rise in the living wage and higher employment costs, said Soames. But he added that “there could be a whole lot of things on the other side that would mitigate and balance” any tax rises.
Examples would include a reform to business rates and a “proper reform of the apprenticeship scheme” to turn it from “a tax now to actually being a working scheme that encourages training”, he added.
CBI boss Rain Newton-Smith on Tuesday warned that certain sectors, including hotels and pubs, would be hit particularly hard by a national insurance rise on October 30.
Soames’ comments came as the CBI informed members it had slumped to an £8.3mn loss last year after a governance crisis and allegations of serious sexual misconduct against some staff caused members to flee, pushing the group close to collapse.
Revenues fell 12.4 per cent to £20.6mn as the self-styled “voice of business” in the UK suffered the loss of subscriptions and commercial revenues after it was forced to suspend its events and other operations for several months.
The accounts for the year ended December 2023, sent to members on Tuesday, show the CBI spent £3mn on costs directly related to the crisis, including lawyers and consultants called in to respond to the allegations and overhaul its culture and governance.
It spent £729,000 on severance payments as it axed staff to stave off collapse. It had an average of 255 staff in 2022 but Soames said the number was now about 160.
The group could have stemmed losses more quickly by making more economics and policy experts redundant but judged that without them it would be less useful to corporate members, said Soames, the former Serco chief executive who joined the CBI in February.
This had allowed it to continue lobbying ministers on the Budget, employment law reforms, pensions and planning, said Soames. He said the group was now more focused than before on issues that cut across all sectors instead of those that individual trade associations were equipped to deal with.
The group lost about one-third of its members during the crisis but Soames said some had begun returning, including nine FTSE 100 groups. BT, National Grid, GSK, AstraZeneca, Schroders, Phoenix Group, KPMG, NatWest, Anglo-American and Centrica have all rejoined this year, Soames said.
The accounts included a warning from auditors over the CBI’s ability to continue as a going concern. It remains reliant on banks to fund its operations, but Soames said the lenders were aware of its financial modelling.
Revenues would fall further in 2024 because many members had already paid their subscription fee for 2023 before quitting the group, meaning the financial impact would only be felt in 2024, he added. This further drop would be offset by lower legal, consultancy and redundancy costs in 2024, he said.
The CBI would come close to breaking even in 2025 and return to profit in 2026, he predicted.
Asked whether he was confident the organisation would survive for the long term, Soames said: “Yes.”
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https://www.ft.com/content/5a10e8a9-5e6f-4c7d-938f-e07cef31c9ba
