Why Tories are worried about Labour’s corporate charm offensive

Shadow Chancellor Rachel Reeves will up the ante next month in Labor’s fight with the Tories to be ‘the business party’ when she travels to New York to meet big investors in the UK.

Reeves’ message to Wall Street and political leaders in Washington during a three-day visit to the United States will be that “with a Labor government, Britain will be open for business,” according to an ally.

Rishi Sunak on Monday launched a major new effort to reconnect Tories with business leaders after relations between the two parties broke down when Boris Johnson was Prime Minister.

Although Downing Street denied Sunak’s Business Connect event in London was aimed at countering Labour’s recent success in courting business leaders, Tory officials privately conceded they needed to up their game.

One said: ‘Labour have started this big prawn cocktail offensive. It might not amount to much in substance, but they’ve clearly done a lot of work on it.

A former Tory minister added: ‘Businesses want the Conservative Party to understand this and have been disappointed under Boris’s leadership when that is not the case. There is a sense of relief now that Rishi is prime minister, but the jury is still out, given the history with Boris.

Sunak’s appearance at the London event, where he delivered a speech and answered sometimes tricky questions from an audience of 250 business leaders, won positive reviews.

Chancellor Jeremy Hunt has admitted corporation tax is too high after UK corporation tax rose from 19 per cent to 25 per cent this month amid pressure from chief executives Sunak company to keep its promises to re-establish links with the private sector.

Burberry chairman Gerry Murphy said the government had scored a “spectacular own goal” by scrapping tax breaks for tourists, while marketing veteran Sir Martin Sorrell said Sunak had to excellent business knowledge but now had to keep his promises.

Johnson’s legacy and abrasive approach to business – he notoriously said ‘fuck business’ in 2018 in response to business concerns over a no-deal Brexit – has given Labor a leg up on Sunak in courting UK plc.

Tesco chairman John Allan praised Labor’s economic plan, saying he was “extremely pleased” with party leader Sir Keir Starmer’s “five missions” to transform Britain. Business leaders flocked to Labor events.

The party’s successful engagement with business coincided with the implosion last year of the prime ministers of Johnson and Liz Truss, and the opposition party’s double-digit opinion polls.

Some Tories argue that Labour’s charm offensive is a public relations exercise aimed at covering up the fact that Starmer, if elected prime minister, would not act in the interests of business.

This week, the Financial Times revealed that Starmer and Reeves have held a series of meetings with private equity bosses to discuss future investments in an industry they plan to hit with an annual £440m tax raid.

As early as 1992 Lord Michael Heseltine, a former Tory Deputy Prime Minister, expressed skepticism of Labour’s ‘prawn cocktail offensives’ with corporations, saying: ‘Never have so many shellfish died in vain.

Franck Petitgas, the former Morgan Stanley executive hired by Sunak this month as a business and investment adviser, told friends the prime minister had already undone the damage of the Johnson era.

But Shadow Business Secretary Jonathan Reynolds said: ‘Companies can see that work has changed. He insisted the party was seriously considering “partnering with businesses” to restore the economy to growth.

There were large-scale exchanges. Reynolds says he, Starmer and Reeves have met with thousands of business leaders, normally hosting a business breakfast every Tuesday before the shadow cabinet meeting.

It helps explain why the Labor Party had to set aside a bigger space for the business forum at its party conference in Liverpool in October. The workforce is also recruiting more corporate engagement staff.

For Starmer, who said Labor should be “proud to be pro-business”, forging strong links with UK boardrooms is an essential part of his centrist rebranding of the party.

The Labor leader has rejected some of the policies of his far-left predecessor Jeremy Corbyn, such as the nationalization of half a dozen industries and the seizure of £300bn worth of shares in listed companies.

Starmer also promised an iron grip on public finances, as well as support measures for businesses, including an industrial policy and a freeze on business rates.

But some business groups have quietly urged Starmer to water down a package of Labor employment reforms that would overturn recent anti-strike legislation and impose new obligations on employers, such as providing staff with full sick pay, vacation and parental leave from day one at a company.

Ben Page, chief executive of Ipsos, a polling firm, said there were reputational advantages for politicians talking to business leaders given the latter group was more popular with the public.

“For Labour, it’s about showing that you’re not full of crazy ideas like trying to expropriate everything and tax everyone in hell,” he added.

“Labour is not traditionally seen as a pro-business party. The idea has always been that the Tories are ‘nasty but efficient’ and that Labor is ‘generous, kind but not good with money’.

Peter Bingle, a veteran lobbyist, said business leaders had been impressed with Labour, and Reynolds in particular.

“The Conservatives have forgotten that they are supposed to be the party of business and they are not at the moment: it is a mixture of higher corporate taxes and not spending time with people”, he added.