The writer is UK Shadow secretary of state for Business, Energy and Industrial Strategy
These are the toughest of times for many of Britain’s businesses. That is why the Labour party has insisted that government has a responsibility to support them so they can survive the current crisis. We know how much they matter to our communities and our country through the jobs they provide. Supporting them to make profits and create wealth is an essential way to support the British people.
As we emerge from the pandemic, we will face a monumental task of rebuilding. There are three crises that we must address: the effects of Covid-19, including a deep recession; the longstanding issue of inequality, which scars our country; and the challenge of climate change.
From my conversations since I became shadow business secretary last April, I know that businesses need — and want — to be at the heart of tackling all three. During the pandemic we have seen companies recognise their wider obligations: from local businesses providing free school meals or shifting to manufacture ventilators to those who have done their best to look after their staff and avoid redundancies.
There is a growing movement of purpose-driven businesses. This is about companies recognising their role “to produce profitable solutions to the problems of people and planet, and not to profit from producing problems for people or planet”, explains Colin Mayer, who is leading the British Academy project on purposeful business.
Business leaders tell me they see this focus on purpose as the best strategy for both profitability and long-term success. Many are deeply concerned about the climate crisis and the damage to our society of extreme inequality. And they are in a position to make a huge contribution.
The institutions we have in the UK do not, by and large, encourage such strategies. In my discussions with business about how we can work together to secure our economy and rebuild our country, it has become clear that four areas need to be examined.
First, in our financial system short-term shareholder pressures continue to discourage businesses from focusing on long-term wealth creation. Patient, institutional shareholders are under-represented compared with most other countries. We have a banking system that is underpowered in its support for the rest of the economy and governments that have been reticent to provide the kind of industrial support common elsewhere for the best part of 40 years.
The successful work on vaccine development in the UK underlines how state support can work. But in aerospace, automotive and other sectors, government rhetoric too often fails to match reality — and falls short of what competitor countries provide. By bringing forward £30bn of investment in low-carbon sectors, as Labour has proposed, the government could support our manufacturers to get through the current crisis and create hundreds of thousands of jobs as part of the green transition.
Second, we need to ask whether company law can better enable businesses to choose purposeful action. Despite some positive changes in the corporate governance and stewardship codes in recent years, we have a standard corporate legal form which clearly privileges the shareholder above other stakeholders.
From model articles of association, to reformulating the description of directors’ duties in the Companies Act, there are creative solutions to promote new purposeful business norms. We also need to accelerate alternative models of business ownership, to spark a new generation of co-operatives, social enterprises, and worker-owned businesses.
Third, purposeful businesses need a regulatory system that works for them, and for consumers and investors, with clear reporting and transparency. Currently, there are a multiplicity of different benchmarks and mainly voluntary requirements from regulators. Government has a crucial role in standardising and, where appropriate, expanding the scope of benchmarks.
Finally, successful, purposeful businesses see consultation and voice for their workforce as an essential part of their way of doing things. There are increasing signs that business is well ahead of government when it comes to understanding this agenda. In recent days the government was forced to backtrack on its plans to undermine workers’ rights. Many businesses are saying that as a country we should become more productive, and more fair, by raising standards and investing in the infrastructure, skills and industries of the future, rather than by competing on low wages and curtailing rights.
Labour is in the early stages of planning its policies ahead of the next election, and we will do so in partnership with the business community. As a party, we are determined to ask deep long-term questions about our country so that we build an economic model that is more resilient, more productive and more just.
It is striking how many businesses are calling for a different way forward for our country. This speaks to how, as we have been through the worst of times, we have seen the best of people, including in the world of work. Businesses, workers, unions have co-operated to do the right thing. This spirit is not just needed for the current crisis but for the enormous challenges that lie ahead. There is a pro-business, pro-society, pro-worker agenda to be built for Britain.