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Given the rollercoaster we’ve all been on, it seems rather fitting that Sir Keir Starmer has unveiled a deal to build a theme park. No doubt there will be many vertigo-inducing rides at Universal’s new Bedfordshire location. But if the prime minister is to make good on his pledge to “seize the possibilities” of the Trump shock, he needs to close the vertiginous gap between his government’s rhetoric on growth, and the reality.
This will take more than a Lord of the Rings castle, and a rehashed announcement on electric vehicles. An administration which came to power promising to be pro-growth has made hiring more expensive, depressed consumer confidence and prompted a catastrophic exit of wealthy individuals to the advantage of our competitors. This week London fell out of the world’s five wealthiest cities. With a strategy for growth heavily dependent on private investment and a dire set of public finances, ministers urgently need to grasp what decisions about investment really involve.
Starmer came into government surprisingly unprepared, wrongfooted by a snap general election, hoping to be a chairman in a role which requires a CEO, and, I was told at the time, worryingly uninterested in the details of the Budget. A big question hanging over Britain’s growth prospects is whether he can grow on the job. Some say he can’t, having come to politics relatively late. Others think he can, after ruthlessly turning around his party. There is already a big difference between the man who won the election and today’s Starmer, frustrated at the slow pace of change and seeking a firmer grip.
He has handled the international turbulence pretty well, and seeks stronger defence and aerospace ties with Brussels. In Washington he has been the careful prosecutor with a well-honed brief (provided by national security adviser Jonathan Powell and ambassador Peter Mandelson). In appointing two such political heavyweights, Starmer recognised his underpowered administration needs experience. He now urgently needs their equivalents on business and financing growth.
The problem is not — as it often was under Boris Johnson — a lack of engagement with companies. It’s the dismay of executives who report meetings in which no one seems to listen or even understand their point of view. CBI chair Rupert Soames, one of the few business leaders to express publicly what many say in private, has urged the government to acknowledge “that the sum of all wisdom does not reside exclusively in Whitehall”.
Starmer is increasingly fronting economic announcements himself, knowing that business has lost faith in his chancellor and her team. His government is pursuing deregulation under the redoubtable Pat McFadden, cutting back the overgrown civil service, and embracing technology in public services. But to build confidence will require many more signals of intent — and rapid delivery.
Policy-wise, there are immediate options. Ministers could implement Sir Dieter Helm’s proposals on marginal gas pricing and reduce the cripplingly high energy costs that drive industries abroad, without sacrificing net zero. They could seize the new opportunity to lure disaffected American scientists and entrepreneurs by improving the high-skilled visa system, revisiting inheritance tax rules and boosting relocation allowances for top researchers. They could speed up the well-received AI plan and encourage corporates to buy from start-ups — something urged by tech entrepreneur Brent Hoberman.
Starmer’s caution doesn’t yet match his claim that the world has changed. “Our plans don’t so much change as turbocharge” he has said. Instead of using the moment to forge a genuinely new relationship with the EU, Downing Street is running scared of Reform UK and presenting closer alignment in chemicals as a stretch. It’s right to pursue a US trade deal, but this may end with chlorinated chicken.
Meanwhile the government continues to send contradictory signals. The department for work and pensions wants companies to help get over a million people back into work; the Treasury has added a National Insurance cost to each of them. The employment rights bill will make it more risky to employ anyone. Starmer either can’t face down his trade union backers who campaigned for this legislation, or doesn’t want to. But the shadow of the unions hangs over investment decisions.
It’s not just about policy, it’s also the mood music. Reeves and Starmer’s continued language about an “active state” and a “partnership with business”, suggests there is unlikely to be a conversion to the philosophy that government should be a small influence on what enterprises do.
Nevertheless there is no doubt that since the end of the Sue Gray vs Morgan McSweeney battle in Downing Street, the centre of power has become more professional. Starmer has brought in Liz Lloyd, Tony Blair’s former deputy chief of staff, and seasoned delivery expert Sir Michael Barber. His business adviser Varun Chandra and the investment minister Poppy Gustafsson have solid experience but Starmer remains reluctant to interfere in the chancellor’s brief.
Britain will only prosper if companies increase the rate at which they invest in growth. They won’t do that without being confident that government will support them. Politicians will blame the Trump slump for some of our troubles. But the ride ahead will show what this prime minister is really made of.
camilla.cavendish@ft.com
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