Big Interview: Carolyn Fairbairn of the CBI

Carolyn Fairbairn in London. The first female director-general of the confederation takes issue with some Conservative policies. Picture: Niklas Halle'n/Getty
Carolyn Fairbairn in London. The first female director-general of the confederation takes issue with some Conservative policies. Picture: Niklas Halle'n/Getty
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The Scottish referendum was an object lesson for the business lobby, says Carolyn Fairbairn, director-general of the CBI. It showed the risks of leaving it too late to argue your case to the electorate.

Fairbairn says many pro-Union businesses only put their heads above the parapet – unlike the Confederation of British Industry itself – “in the last two weeks, which is not the way to do it. There was a realisation that the public vote is unpredictable and you can take nothing for granted.”

By contrast, pro-EU business people have been loosing off their arguments in a fusillade well ahead of the UK referendum next month on continued membership of the single bloc. Fairbairn alludes quickly to the CBI’s members in the final survey before the referendum having voted “resoundingly” Remain – 80 per cent – with just 5 per cent for Leave and 15 per cent don’t knows.

The Remain business arguments are well-known. A Brexit victory would threaten Britain’s access to the single market with some 500 million consumers, where nearly half of the country’s exports go at present. But Fairbairn doesn’t duck the issue of whether any withdrawal from the EU might lead to another Scottish independence referendum a lot earlier than the “once in a generation” event it was billed as nearly two years ago.

“I see the linkage. But it comes over time and time again that businesses want certainty,” she says. “I would hope for the sake of investment, infrastructure etc that we would not face another independence referendum. I don’t know, it’s very difficult to call now.” The CBI boss admits she hopes the issue simply does not arise after a UK vote to stay in the EU club.

She is, however, aware of the danger of voters feeling intimidated and irritated by a phalanx of purely economic arguments for remaining in the EU. Business must act with “humility”, Fairbairn argues, accepting the legitimacy of the electorate weighing arguments about exports, jobs, investment etc against visceral concerns such as “security or immigration”.

But Fairbairn says the CBI and heavyweight businesses that have spoken out on the benefits of EU membership, such as Siemens and Nissan, would be neglecting their “duty to explain” if they did not say what they feel is economically at risk from a break with Brussels.

“Business was accused of scaremongering in the Scottish referendum in 2014 as well. We said ‘what if the oil price fell?’ Sometimes it is just important to know the risks you are taking.” She leaves unsaid the obvious fact that since the vote, there have been tens of thousands of North Sea redundancies as energy giants have pulled projects prompted by an oil price slump from $115 a barrel to around $45 at present.

But what if the electorate still vote to quit the EU? Fairbairn, who became the first woman to head the CBI last November, does not mince her words. “The remaining 27 EU countries would negotiate our terms of trade with them. They would hold all the cards. I think it would take five years to get a clear picture of what Britain’s global trading relationships would be like.”

Away from the issue du jour, Fairbairn says that although UK economic growth has clearly slowed in the face of headwinds such as the Chinese slowdown and rising US interest rates, “we should not talk ourselves into a downturn”.

She cites positives such as the UK’s low unemployment, low inflation, and one of the lowest rates of corporation tax in the G7 – 20 per cent now and due to fall to 17 per cent in 2020, “a major factor in attracting inward investment from abroad”. Well under 2 per cent of the UK economy is in oil and gas, and only 4 per cent of our exports go to China, she adds. “Among businesses, the mood is quite positive about the UK economic outlook.”

On other matters, Fairbairn is “delighted” that the UK government set up a national infrastructure commission last year, addressing a CBI hobbyhorse – namely, the need to improve the quality of Britain’s rail, roads, aviation, broadband and cost of energy supply to help businesses sell and transport goods.

The planned HS3 fast rail link between Manchester and Leeds to help buttress Chancellor George Osborne’s aspirational Northern Powerhouse is one example Fairbairn names, although her brow darkens at the government “kicking the can down the road” on a decision on Heathrow airport’s expansion until this summer. “There is anger and frustration, and we will be very vocal for this decision to be taken in July,” she says.

Other positives, she adds, are the launch by the UK government of a plan to narrow Britain’s longstanding productivity gap, currently 30 per cent with the US and 28 per cent with Germany; and the removal of hundreds of thousands of small businesses in England and Wales from the business rates system – a move that Scottish SMEs hope will be replicated by Holyrood.

Fairbairn admits that the CBI has had a periodically “challenging” relationship with the SNP, but says “engagement” is better now and that “we have been encouraged by Holyrood’s language of business optimism”.

Even so, the CBI has disagreements with the political administrations on both sides of the Border. The new UK Apprenticeship Levy was a “major intervention” in the economy and “needs a fundamental rethink”, says Fairbairn. The levy’s focus on training done by external providers is too narrow when many major businesses do most of their apprenticeships in-house. It is also a big ask to get a whole new computer system to back the initiative up and running by the launch next April, she argues.

The levy could raise about £3 billion a year from business, with firms being able to reclaim money if they set up the right kind of apprenticeship scheme. But Fairbairn has a particular Scottish concern. “The levy will be raised from firms in Scotland, but there’s no mechanism currently to ring-fence it and ensure it is spent on apprenticeships.

“We want Holyrood to commit to using it for skills growth [as will be the case in England and Wales]. It would be bad if there was a fracturing of apprenticeship standards across the UK”.

The CBI is also unhappy about Holyrood’s doubling of business rates for large companies to fund other programmes. The large company supplement has been estimated to generate an additional £60 million and will affect one in eight Scottish commercial premises.

“It creates an additional burden for business when the fragility of the economic recovery is arguably greater in Scotland,” says Fairbairn.

On the broader UK canvas, the CBI chief is also cool on what she sees as new Business Secretary Sajid Javid’s approach to industrial strategy. “The Business Secretary does not believe as much in sectoral strategies. His approach is to create the conditions for growth. It’s very broad brush but risks putting us at a disadvantage with the likes of China and Germany,” she says.

Fairbairn cites the stark contrast between the buoyant UK car industry, and the bleeding steel sector. “Automotive was moribund in the UK 20 years ago. But Nissan Sunderland, for instance, now produces more cars than the whole of Italy.”

Fairbairn indicates that government imagination in areas like R&D and supply chain developments helped transform the automotive industry, while steel was left to wither on the vine of unproductivity even before Chinese steel dumping brought the crisis to a head. The CBI is urging the government to “rekindle” a sectoral approach.

“It’s not about picking winners, it’s about having a vision for a sector,” she says.

Curriculum Vitae

Born: London

Education: Bryanston School, Dorset; Gonville and Caius College, Cambridge; University of Pennsylvania; INSEAD.

First job: Checkout assistant, Budgens.

Ambition at school? To make a difference.

Kindle or book? Book.

Can’t live without? Three cups of coffee in the morning.

Car? Mini.

Favourite book? Fiction, Any Human Heart by William Boyd; Non-fiction, Being Mortal by Atul Gawande.

Worst piece of business advice ever given to you? Never apologise, never explain.

What inspires you? People with the courage and conviction to change things.

Best thing about your job? Meeting young entrepreneurs who are our business leaders of the future.