Summary
We’re now closing this blog down. Here’s our latest story from my colleague Joanna Partridge on the CBI vote:
The Confederation of British Industry (CBI) has said it has won a confidence vote put to its members after sexual misconduct allegations.
Britain’s most prominent business lobby group said on Tuesday a majority of its members had backed its proposals to overhaul its culture and governance, with 93% of votes cast in favour of continuing to support the CBI, while 7% were against. There were 371 votes in total with 23 abstentions/votes withheld.
In a poll which began last week and closed on Tuesday, the CBI asked its members to vote on the following motion: ‘Do the changes we have made − and the commitments we have set out − to reform our governance, culture, and purpose give you the confidence you need to support the CBI?’
Rain Newton-Smith, the CBI director general, said: ‘After an incredibly tough period, I’m deeply grateful for the faith shown in us by our members. We’ve made real progress in implementing the top-to-bottom programme of change promised by the board and, while there remains work to do, today’s result represents an important milestone on that journey.’
More than 50 of CBI’s highest-profile members, including the retailer John Lewis and banking group NatWest, left the organisation or suspended their membership in April, after the Guardian revealed a series of sexual misconduct allegations, prompting the government and the Labour party to suspend engagement with the body.
Businesses and trade associations that had suspended their membership, rather than terminated it, were still able to take part in the poll.
That article’s being updated as the story develops, so please check back for updates:
Updated
The Guardian covered the establishment of the Confederation of British Industry in 1965, reporting on the appointment of its first director-general John Davies.
The chairman of Shell-Mex and BP Ltd spoke confidently on taking up his new post at the CBI – an organisation set up to enable British industry to speak with one voice – on how industry and government were now “strongly intermeshed” and need each other’s assistance to progress.
Updated
The British Chambers of Commerce, which launched a rival business lobby group to the CBI on Monday, said it welcomed the result of the vote – but that a “range of voices” was needed to represent British businesses. Shevaun Haviland, its director general, said:
We are pleased to see the news that the CBI was successful in passing the vote to ensure its future at its extraordinary general meeting (EGM) this afternoon.
Given the challenges facing the UK economy, it is vital for the business community to have a diverse range of voices representing their concerns and priorities into government.
With the clock now ticking on the next general election, businesses must be confident that they have strong and effective representation. We recognise that the CBI still has work remaining in the weeks and months ahead, which will no doubt be challenging. However, we welcome the passing of the vote today and look forward to working with them again into the future.
Updated
Given the size of the CBI, and its claim to be the UK’s premier business organisation, the turnout in today’s referendum feels modest – at 371 votes in total, with 23 abstentions.
The Financial Times points out that the CBI did not disclose how many members had been eligible to vote, making it unclear how many CBI member companies and trade associations did not cast a vote at all.
Updated
Executive: Hard to see CBI regaining political credibility
One executive, who attended the CBI meeting, tells us:
“While they may have retained the confidence of their smaller members, they have lost the credibility with the very politicians their members need them to influence.
Ahead of such an important election, it is hard to see them regain their legitimacy.”
Ann Francke: Lessons must be learned from CBI's sorry episode
The CBI may have won its vote of confidence from members, but businesses and government will now want to see clear evidence that the group is delivering on its promise to change, says Ann Francke OBE, CEO of the Chartered Management Institute.
Francke explains:
“While the CBI has won some much-needed breathing space, the difficult challenge of cultural transformation still lies ahead.
“Committees and consultants don’t transform organisations; leaders and managers do, through what they say and what they do each and every day.
“Both businesses and government will now want to see clear evidence that the CBI is delivering on its promise to change. A mandate from the members is not enough, on its own, for the CBI to believe it can draw a line under the management failures that led to the events of the last six months and move on.
“Leaders at all organisations should view this sorry episode at one of the country’s most high-profile bodies as a chance to learn from the mistakes of others and ask themselves if they need to revisit their own workplace to make sure they are getting their culture right.
“We wish the new team at CBI well as they embark on their ambitious transformation of building an inclusive and transparent leadership culture.”
Reminder: companies who quit the CBI after the lobby group was rocked by allegations of sexual abuse in April, such as Aviva, Natwest and BP, were not able to vote in today’s poll.
#Breaking The Confederation of British Industry (CBI) has won support from members at a confidence vote over its future, the business group has announced pic.twitter.com/tV0octXc96
— PA Media (@PA) June 6, 2023
Breaking: CBI members vote in favour of confidence vote to support CBI.
— Ashley Armstrong (@AArmstrong_says) June 6, 2023
93% of votes backed the motion;
7% of votes rejected the motion;
There were 371 votes in total with 23 abstentions/vote withheld.
Boss Rain Newton Smith says will "be the best voice for business inside &out"
Newton-Smith: it's been an incredibly tough period
Rain Newton-Smith, the CBI’s new Director General, has welcomed today’s vote:
Newton-Smith, who was appointed DG in April following the dismissal of predecessor Tony Danker, says the CBI will “work tirelessly” to repay members’ faith.
Newson-Smith says:
“After an incredibly tough period, I’m deeply grateful for the faith shown in us by our members. We’ve made real progress in implementing the top-to-bottom programme of change promised by the board and, while there remains work to do, today’s result represents an important milestone on that journey.
“Even an organisation as established as the CBI is only as strong as its members. That support is something we have never taken for granted. We will work tirelessly to repay the faith shown in us and are committed to living the values and changes we have proposed.
“Let me be clear, we have listened, we have acted, and we will leave no stone unturned to be the best voice for business inside and out.
“We also heard another important message from members. That they want us to bring our breadth and depth of expertise, as well as our unique convening power, to bear on the economic challenges of the day.”
BREAKING: CBI members back reform plan
Newsflash: The CBI says it has secured a strong mandate from its membership.
The business lobby group says that 93% of votes cast were in favour of its reform plan, out of 371 votes in total, with 23 abstentions/vote withheld.
The CBI says:
93% of votes backed the motion;
7% of votes rejected the motion;
Reminder, the question was:
Do the changes we have made − and the commitments we have set out − to reform our governance, culture, and purpose give you the confidence you need to support the CBI?
Today’s extraordinary general meeting was called to decide the CBI’s fate after sexual misconduct allegations revealed by the Guardian, which led to several major companies to quit the CBI… and both the government and the opposition to suspend work with the group.
The CBI is speeding up its search for a new president, and plans a new-look board, to stop late-night parties, review its governance processes and set up a new board subcommittee on culture.
Updated
Three company bosses have told Sky News’s Paul Kelso that they have backed the CBI’s reform plan, and expect it to be passed in today’s vote….
Voting on CBI confidence motion at EGM has now closed, with three
— Paul Kelso (@pkelso) June 6, 2023
company bosses in the room saying they voted in favour of the reform plan & expect a majority to have done likewise. “You can’t throw the baby out with the bath water,” said one
CBI EGM breaking up now, one participant who voted in favour of confidence motion says there were no dissenting voices or negative questions from more than 600 participants online & in person, expects result to be a “strong yes”
— Paul Kelso (@pkelso) June 6, 2023
We could soon have a result on the CBI’s referendum on its future.
Votes have been submitted electronically, either virtually or by members who attended today’s meeting in person.
The result is expected between 4pm and 5pm today, once those votes have been independently counted and verified.
Elsewhere in business today, Marks & Spencer’s co-chief executives both took home more than £2m in pay last year as sales and profits jumped.
Stuart Machin earned £2.5m including a £1m bonus and Katie Bickerstaffe earned £2.25m after a £989,000 bonus.
Their bonuses reflected them achieving just over 77% of their financial targets even after directors discounted £20.5m of profits gained following the acquisition of the group’s food distribution partner Gist.
Both earned close to the figure earned by the group’s former boss Steve Rowe in his final year at the company. He was paid £156,012 in salary for his last months as a director and then a further £76,000 before exiting the company in July last year, according to the group’s annual report. M&S’s statutory pretax profits rose by 21% to £476m in the year to April while sales rose almost 10% to £12bn.
In the year ahead, both its chief executives will receive a 3% increase in basic salary so that Machin will earn a minimum of £922,000 and Bickerstaffe £811,000 for her four-day week. If they meet performance targets they could earn £5.7m and £5.2m respectively.
We hope to have the result of today’s CBI members vote, on whether they support the group following its reform efforts, within a couple of hours.
But, my colleague Nils Pratley writes, the outcome may not be clear…and could be open to interpretation.
Nils explains:
Why? Well, since several high-profile members – the likes of NatWest, the John Lewis Partnership and Aviva – have resigned, there is a slightly self-selecting flavour to the electorate. It has also been noticeable in the days since the CBI published its “prospectus for change” last week that corporate waverers – companies that “paused” or suspended membership – have not been publicly clamouring to get back into the fold. Maybe some are waiting for the meeting to make a splash or have returned without fanfare. But it’s odd that the top letter-writers to the Times in defence of a 58-year-old British business organisation have been the UK subsidiaries of three foreign firms: Siemens of Germany and Microsoft and ExxonMobil of the US.
To change the script, the CBI really needs a few domestic FTSE 100 heavyweights to pipe up. Thus, even when the result of the vote lands, it may be hard to tell the difference between a ringing endorsement by loyalists and a show of general apathy by UK plc. This is an unusual poll. It is as much about who doesn’t vote as who does.
So with the British Chambers of Commerce limbering up to take on the CBI’s role with a new Business Council, today’s vote at the CBI is probably not the end of the story….
More here:
Updated
World Bank: Poorest countries are biggest losers from economic shocks
Away from the CBI meeting….the world’s poorest countries are the biggest losers from a global economy failing to cope with the combined impact of the Covid pandemic, Russia’s invasion of Ukraine and the tough anti-inflationary measures taken by central banks, the World Bank has said.
In its half-yearly update, the Washington-based body said the international community was well off course to meet the UN’s 2030 anti-poverty development goals and warned of the risk of a fresh debt crisis for the most vulnerable countries.
The Bank said the global economy was struggling despite slightly revising up its 2023 growth forecasts and no longer fearing a second recession in the space of three years.
It said the upbeat news was already in the past and predicted a slowdown in the second half of the year as the impact of higher interest rates in rich countries rippled out to emerging and developing nations.
More here.
CBI director general Rain Newson-Smith ended her speech today by urging members to give the business lobby group their support.
She said:
We know you prize our ability to open doors to government and opposition parties.
The access we’ve given you for the last 60 years – to shape policy and regulation at the highest level.
You’ve told us you need to see that we can get back to that.
We can and we will. We just need your support.
In the last few days, I’ve had great conversations with members across the UK – where they’ve told us… yes. They do have confidence in us.
But the question now is – do you?
All of you gathered here today in person and watching online.
We’re ready to deliver a better CBI.
We just need one thing now – your vote.
We have been there for you in the past, now this is a moment when I and our talented teams at the CBI need you.
Thank you.
Updated
One CBI member tells us that they estimated there were around 120 attendees at today’s meeting, which has now finished.
There were also plenty of CBI staff outside, and in offices watching the meeting on TV.
The atmosphere in the room was “fairly positive”, they add, with questions including when the CBI will reengage with the government.
They say it feels like the CBI will win the vote.
Updated
Elizabeth Wallace, the CBI’s chief people officer, has addressed the planned redundancies at the organisation.
Sources at today’s meeting said that Wallace explained the group was “looking at every single way” to avoid redundancies. Wallace said the final decision on redundancies would depend on the result of the vote.
She said that the more votes in favour and the more of its membership returns “the less that we’ll need need to rely on that process.”
[Reminder: staff were told last week that the CBI needs to cut its wage bill by a third within months, following a drop in membership revenues after some large firms quit the group].
Updated
CBI director general Rain Newton-Smith argued that the UK needs the CBI to help fight climate change, as she urged members to support today’s resolution.
Newton-Smith told today’s meeting that the CBI has been “one of the loudest business voices on how to tackle climate change and decarbonise our economy”.
From writing Net Zero into law four years ago, to working with you to set science-based targets for many of your companies ahead of COP26 in Glasgow and – to make that the first truly business-friendly COP.
For us, it’s both a moral and economic imperative – to get the UK ahead in the global race for green growth and investment. And there’s still so much more that needs to be done. It’s an issue that, because of its complexity and scale, calls for a whole-economy approach. And it’s not the only issue that needs that by any means.
So for these issues and more, we don’t have a moment to lose.
Newton-Smith adds that it is a “critical time” for business, for the economy, and for politics, adding:
Not just Whitehall and Westminster, but Holyrood, Stormont and the Senedd. There are the Metro Mayor elections just round the corner, ahead of a critical UK General Election next year.
For which, we’ll co-develop a Business Manifesto with you – to help inform and shape the national debate.
The CBI was too focused on external matters, and not enough on its internal organisation, says the group’s new interim chief people officer, Elizabeth Wallace.
Wallace, who was appointed in mid-May, tells today’s EGM that nearly 90 per cent of CBI staff responded to a survey on its culture.
She explains to the meeting:
We discovered that in the past some of our colleagues did not have the confidence that when things go wrong, the right things would happen. Leadership actions were not consistent and did not set the right tone of accountability. We know that we had many HR policies, processes and training programmes. Though the intention was good, they were not all fully working and not embedded consistently into our culture.
We learned that we were too focused on the external aspects of our organisation, and not enough on our own internal organisation.
We know that not everyone at the CBI has had a consistent employee experience and that we need to provide greater clarity. We know that we have not been consistent in developing our leadership skills and capabilities. We also know that we must attend more to our organisational values and consistent expectations for behaviour.
Finally, we know that we as leaders need to positively set the tone from the top and have a greater degree of accountability than ever before.
Wallace adds that the CBI have refreshed its HR policies, including those relating to harassment and bullying, and accepted all 34 recommendations from Fox Williams’ investigation spanning HR, behaviour, culture, policies, processes and structures.
She says:
We have already implemented almost 80% of the recommendations with the remainder in progress.
Ffion Hague, an expert in Board evaluation and governance reviews, is attending today’s CBI extraordinary general meeting, Brian McBride adds.
Hague will lean an in-depth external review of the CBI’s governance structures and processes, and deliver a full report to the board by the end of July on the CBI’s leadership team, the Board and our committee structures.
McBride tells CBI members at today’s EGM:
Before that though, we’re working hard and fast to drive change from the inside.
The biggest include accelerated changes to Board membership, more frequent Board meetings, and the creation of a new CBI Nominations Committee. We’re also going to ask you, our members, to elect all Board directors annually at our AGM.
The CBI is also launching a new People and Culture Committee, a Culture Advisory Committee, and starting to find a successor for McBride as president by January 2024.
Updated
CBI president: transforming our culture is a huge task
On the CBI’s culture, president Brian McBride reminds members that business ethics consultancy Principia Advisory has been hired to help overhaul its operations.
McBride tells today’s EGM:
While Principia found that the label of ‘a toxic culture’ did not apply to the CBI, we know that transforming our culture is a huge task. That takes months and years, not days and weeks. So, let me be crystal clear – we are committed for the long haul.
We have asked Principia to continue to give us quarterly updates on our progress reforming our culture. Within 12 months, we will also have a full external audit of our cultural reforms and our work to reinforce our no-tolerance approach to sexual harassment.
CBI president pledges immediate and decisive disciplinary action over misconduct
Back at the CBI’s Cannon Street offices, president Brian McBride has told members that the group “underestimated the daily effort required to maintain robust processes and a strong, good culture”.
McBride says:
When we were made aware of the allegations recently by the Guardian, we took action immediately. Within 24 hours we brought in Fox Williams, the independent and highly respected law firm, to establish the facts – and any broader lessons for the CBI.
And we are taking swift, substantive action to reinforce our no-tolerance approach to sexual harassment and bullying. Wherever an allegation of misconduct is made, it will continue to be taken seriously and properly investigated. But where a finding of misconduct is made, it will be met with more immediate and decisive disciplinary action.
He adds that the CBI’s new Interim Chief People Officer, Elizabeth Wallace, will make certain staff have “the clear and accessible escalation channels they need”, and also feel “comfortable and empowered to use them”.
Shell has confirmed it plans to sell its retail business supplying households in the UK, Germany and the Netherlands.
The oil and gas supermajor said in January that it had launched a “strategic review” of the business, putting more than 2,000 UK jobs at risk.
The review could have ended with Shell deciding to keep the businesses, but it said on Tuesday that the review had now concluded and that “we intend to exit those businesses”, adding:
“A sales process is already underway, with the intent to reach an agreement with a potential buyer in the coming months.”
The unprofitable UK unit, which is headquartered just outside Coventry, has 1.4 million energy customers and about 500,000 broadband users.
Shell said that “nothing will change for our customers during the sale process” and that it is committed “to ensuring a seamless transfer to a buyer capable of delivering on its obligations, including our intent to maximise employment”.
Shell launched into the home energy supply market in 2018 after acquiring First Utility. Retail energy suppliers have struggled in recent years with nearly 30 UK operators going bust.
Rivals Ovo and Octopus have reportedly reached the second round of bidding for Shell’s UK retail business. British Gas owner Centrica has also been linked to a deal. US investment bank Lazard is working on the sale of the business, which is estimated to be worth $50m to $100m.
What happens if members vote no at today’s EGM?
It is not entirely clear what will happen should the CBI not win the vote that it has put to members, PA Media say, adding:
The body has not been clear if it has any plans in the case of a “no” vote.
Reports have emerged that it has brought in restructuring experts to help should it fail.
It could also try a different plan to try to win backing from members.
CBI EGM underway
The Extraordinary General Meeting to decide the fate of the CBI should be underway, at the lobby group’s offices in Cannon Place, London.
Following the crisis at the CBI, following sexual misconduct allegations revealed by the Guardian, the group’s members are being asked to support its reform plan. Journalists are not allowed into the meeting, though.
That prospectus, revealed last month, includes appointing a new president and giving members an annual vote on the make-up of its board, following claims of sexual harassment at the CBI made by more than a dozen women, with two separate allegations of rape.
CBI members will be asked to vote on the following resolution.
“Do the changes we have made − and the commitments we have set out − to reform our governance, culture, and purpose give you the confidence you need to support the CBI?”
Members can attend in person (in which case they’ll get lunch after 1.30pm). It is due to last 90 minutes, with presentations and a Q&A.
The meeting was expected to start with a rallying cry from Rain Newton-Smith, CBI Director-General, saying:
“I’m confident and determined this will be a turning point for us. The start of a new chapter, for a renewed CBI.
“It’s so important to me, and for those who raised their voices, to put our people, our culture and our values front and centre.
“This is a difficult but important journey. We’ve made great strides forward, but it will take real dedication. I am resolutely committed to leading that change and restoring the CBI to health.
“I know what this organisation can do when it is at its best. I’ve seen what we can achieve, and how powerful we can be in driving change. Even our competitor groups have admitted they can’t match all that.
“We’re ready to deliver a better CBI. We just need one thing now – your vote.”
The result of the vote is due between 4pm and 5pm today.….
Updated
Mark Wallace, chief executive of Total Politics, tweets:
Enjoying the CBI accusing the British Chambers of Commerce of “opportunism” for setting up a competitor when the former big beast is in crisis. Er, yes, this is how competitive markets work.
— Mark Wallace (@wallaceme) June 6, 2023
Updated
Rain Newton-Smith claimed this morning that eyebrows were raised when the British Chambers of Commerce launched its Business Council this week, aiming to bring together business leaders “who are looking for a different kind of representation”.
Two of those eyebrows belonged to Karan Bilimoria, the Cobra Beer entrepreneur and former president of the CBI.
Lord Bilimoria, who is a CBI board member, told Bloomberg he was “very disappointed” by what he had heard and read.
He said:
“Had the tables been turned, I would be doing my best to support my fellow business organizations, not trying to take advantage of any difficulties that they are going through.”
War of words ahead of the CBI vote.
— Julian Harris (@Hariboconomics) June 6, 2023
- Rival's bid to gain ground "raised eyebrows", says boss.
- Lord Bilimoria 'very disappointed' by BCC's move.
- One chambers chief accused CBI of 'monopolising'.
Also: Big Four audit giants have all abandoned CBI.https://t.co/bAhtQYBEQC
Journalist Stephen Pollard has given the CBI the thumbs-down, following director-general Newton-Smith’s interview on Today this morning (see earlier post onwards).
Rain Newton-Smith keeps talking about CBI's "learnings".
— Stephen Pollard (@stephenpollard) June 6, 2023
I'm aftaid that is the final straw.
Close it now
Sky: CBI faces ridicule over senior executive's 'transparency' claim
Sky News are reporting that the CBI is facing “ridicule”, hours before today’s vote on its future, after a senior executive hailed its “transparent” handling of the misconduct crisis which has left it facing collapse.
That claim of transparency is questionable, as the CBI has blocked the media from watching today’s EGM – with members who resigned also unable to take part.
Sky says an email sent by Henry Aldridge, the CBI’s deputy director of trade associations, on Monday urged members to speak publicly in support of the business lobbying group.
They say:
Mr Aldridge obliquely addressed an attempt by the British Chambers of Commerce to capitalise on its rival’s travails, saying that “any public message of support would be appreciated”.
“The CBI’s collective voice, is the only credible voice for all business, that is truly representative and backed up by economic rigour.
“It is not in the interests of business to have that voice split.”
He claimed that the CBI’s prospectus for reform, published last week, outlined the changes the CBI had made “in as transparent and detailed way as is humanly possible”.
One executive at a trade association which was previously a CBI member and who had been forwarded Mr Aldridge’s email said the claim was “laughable”.
Revealed: The CBI is facing ridicule hours before the result of a vote on its future after a senior executive hailed the "transparent" way it has handled its sexual misconduct crisis - despite blocking the media and non-members from watching today's EGM. https://t.co/kVkUGOnuE7
— Mark Kleinman (@MarkKleinmanSky) June 6, 2023
More economic data: Retail sales in the eurozone were unchanged in April, with consumers spending less on food and car fuel, but buying more online.
Retail sales volumes in the single currency bloc flatlined compared with March, and were 2.6% lower year-on-year, statistics body Eurostat reports.
#Eurozone Retail #Sales April 2023 Report pic.twitter.com/ZapC8O8GxU
— RAFFA ?? 🚨 (@RaffaBank) June 6, 2023
All of the so-called Big Four audit firms have turned their backs on the CBI, ahead of today’s meeting, Bloomberg point out.
They say:
A spokesperson for KPMG said its membership had elapsed on June 1 and that it wouldn’t attend the vote. EY terminated its membership in April and Deloitte withdrew from the group last month. PwC suspended engagement with the CBI and is not taking part in the vote.
More here; CBI Faces Crunch Vote Amid War of Words With Rival Lobby
Bloomberg also reported this week that companies such as BT Group and Flutter Entertainment — the FTSE 100 owner of PaddyPowerBetfair — will not take part in Tuesday’s vote, according to people familiar with the matter.
Big businesses are shunning a crucial meeting to decide the future of the CBI, as the lobby group faces potential collapse amid a sexual assault scandal. https://t.co/MWXfvsa4EP
— Bloomberg (@business) June 4, 2023
The drop in UK housebuilding last month (see earlier post) highlight the weakening demand for housing as people are still cautious given interest rates and the cost-of-living crisis.
So says Kelly Boorman, partner and national head of construction at accountancy firm RSM UK, adding:
The UK’s housing market is showing signs of distress as net mortgage lending contracted by £1.4bn in April, the lowest level on record excluding the pandemic.
But, with mortgage rates set to jump even higher, coupled with house prices falling at the fastest rate since July 2009, there are further headwinds for the housing market, with housebuilders pulling back on projects to protect their margins.
Tell us: how is the UK’s rising cost of living affecting your options in life? https://t.co/pkllmjltwF
— The Guardian (@guardian) June 6, 2023
Energy company SSE has tweeted its backing for the CBI, ahead of today’s extraordinary general meeting to decide the group’s future.
SSE says it will vote in favour of today’s motion, and are supporting the letter published yesterday – signed by 13 groups including Siemens, Microsoft and Esso – saying the CBI has recognised its failings and should get a mandate to continue.
SSE will be voting in favour of ‘A Renewed CBI’.
— SSE Plc (@SSE) June 6, 2023
We echo the sentiments in the recent letter from businesses which says the CBI (Confederation of British Industry)’s new prospectus recognises “its failings and has a robust action plan to be delivered by new leadership. https://t.co/qzd4y6gAMI
This endorsement comes a few hours after SSE was hit by a near-£10m penalty by Britain’s energy regulator.
Ofgem said a detailed investigation had found that SSE Generation had secured “excessive payments” from the National Grid, the electricity system operator (ESO), during periods of what is known as “transmission constraint”.
As a result, Ofgem has issued a penalty of £9.8m to SSE Generation.
Despite the slump in UK housebuildling last month, today’s construction PMI indicates that UK economy will grow in the second quarter of this year.
The EY Item Club say:
With the services index also pointing to robust growth, it’s looking more likely now that the economy will manage to expand in Q2, despite the drag on activity from the extra public holiday for the Coronation and the impact of industrial action.
UK house building falls at steepest rate since May 2020
Just in: UK housebuilding contracted at the steepest rate since May 2020 last month.
Data provider S&P Global reports that house building remained by far the weakest-performing part of the UK construction sector in May, with output declining at the steepest pace for three years (back to when building sites locked down due to Covid-19).
S&P Global’s monthly poll of purchasing managers at building firms found that housebuilding activity was dampened by worries about the impact of higher interest rates and subdued market conditions.
Aside from the pandemic-related downturn, housebuilding shrank at the fastest rate in just over 14 years.
That will add to concerns that England’s faces a huge shortfall of new homes, due to a slowdown in supply of new housing.
Tim Moore, economics director at S&P Global Market Intelligence, says cutbacks to new residential building projects drove down housing activity.
This meant that residential work underperformed the rest of the construction sector by the greatest margin since October 2008.
Survey respondents also commented on concerns about the broader UK economic outlook, which contributed to an overall drop in output growth projections to the lowest for four months.
But overall, construction output gained momentum amid the strongest rise in new orders since April 2022, which lifted commercial building work and civil engineering.
Here’s the details, from Noble Francis, economics director at the Construction Products Association.
The S&P Global/CIPS UK Construction PMI was 51.6 in May 2023 compared with 51.1 in April. 50=no monthly change so construction activity in May had marginal growth that was marginally faster than in April. (1/n)#ukconstruction #construction pic.twitter.com/a1xitFRpNe
— Noble Francis (@NobleFrancis) June 6, 2023
The S&P Global/CIPS housing PMI was 42.7 in May 2023, the 6th consecutive monthly fall in activity & the lowest figure in over 14 years (excluding the initial lockdown when construction was not permitted) , illustrating... (2/n) #ukconstruction #construction #ukhousing #housing pic.twitter.com/Z6rkguyMVk
— Noble Francis (@NobleFrancis) June 6, 2023
... the continuing sharp fall in house building activity on site as the 30-40% fall in private house building demand after the Mini Budget debacle in Autumn & the consequent spike in mortgage rates continues to feed through. (3/n)#ukconstruction #construction #ukhousing #housing pic.twitter.com/mbRSdB5ces
— Noble Francis (@NobleFrancis) June 6, 2023
The S&P Global/CIPS UK commercial construction PMI was 54.2, illustrating the ongoing strength of offices refurbish projects (as demand for grade A office space remains high) & as commercial owners convert existing space rather than build new. (4/n)#ukconstruction #construction pic.twitter.com/mkHk7hDtf1
— Noble Francis (@NobleFrancis) June 6, 2023
The S&P Global/CIPS UK civil engineering PMI was 53.9 with continued growth in infrastructure; spending plans in place & materials price inflation concerns slowing (albeit from high prices) so clients are more willing to sign off contracts. (5/n)#ukconstruction #construction pic.twitter.com/QORt4kwiy9
— Noble Francis (@NobleFrancis) June 6, 2023
Elsewhere in the global economy, German manufacturers have suffered another drop in orders, raising fears over an economy already in recession.
German factory orders dropped by 0.4% month-on-month in April, dashing expectations of a 2.8% rise, driven by a slump in large-scale orders. That follows a 10.9% drop in factory orders in May.
On an annual basis, orders were down 9.9% on April 2022.
Domestic orders rose 1.6% while overseas orders fell 1.8% month-on-month. New orders from outside the euro zone fell by 1.1% and orders from the euro zone by 2.7%.
🇩🇪 German factory orders unexpectedly fell in April, further dimming prospects for Europe’s largest economy after it endured the first recession since the pandemic over the winter. https://t.co/Wdq3nZHKay
— Jack Hoogland (@jack_hoogland) June 6, 2023
Neil Wilson of Markets.com says:
German factory orders this morning are quite weak at –0.4% vs +2.7% forecast, though nowhere near as bad as the revised 10.9% decline in the previous month.
CBI DG says group can still discuss issues of the day and will learn from crisis
Q: Do you accept that any programme the CBI runs right now, on workplace culture, is not credible, Today asks.
Rain Newton-Smith does not recognise that is true. She tells Today:
If we have the support of our members, then we can go out and talk about the issues of the day.
Those issues include economic challenges including the cost of living crisis, the UK’s “anaemic growth”, and the huge challenge around how business tackles cimate change.
She doesn’t see another organisation which can speak across sectors and regions with credibility and depth.
Q: The British Chambers of Commerce have just launched a brand new one….
Newton-Smith claims that the timing of the BCC’s new Business Council has “raised a few eyebrows among businesses”.
She hopes the CBI can go back to working very closely with the BCC, billing them very much as a junior partner which is “very good” in its local chambers.
But they don’t have depth of experience around economic surveys, and they can’t cost policies such as childcare reform, she insists.
Q: They can talk to the government today, though, and you can’t.
Newton-Smith challenges the government, and the opposition, to reconsider their current veto, assuming the CBI wins today’s vote.
If we can show we have the support of our members, with 3.5m private sector jobs represented by our direct membership, and a huge, million jobs also represented through our trade association networks, why won’t you speak to us?
We need to have a moment when we can move forward.
Newton-Smith adds that the CBI is determined to learn from its crisis, and share the learnings with ‘wider society’.
We’re being open about the journey we’re on, and I think that is what establishes trust from business, from government and from policymakers.
Updated
Newton-Smith: We clearly have work to do to improve our governance.
Q: But you’re asking for members support, without having fixed your probems and competing the programme of change?
How can you conduct work such as ‘best practice in business’ when you acknowledge your own culture hasn’t been fixed?
CBI director-general Rain Newton-Smith replies that the CBI has been “really open” about the changes it needs to make.
She says:
I would challenge any organisation in this country to look deeply within their organisation and make sure they’ve got the right culture and values.
Q: So why is your president saying you need to fix the culture longterm? [writing in the Financial Times].
Rain Newton-Smith insists the CBI has set out “clear milestones” of what it needs to do, and show it has done.
We have done a series of investigations that have come out with a set of recommendations, and we’ve implemented almost three-quarters of them.
The ones left include insuring there is “full trust and confidence across all areas of our business” that the change programme has been implemented fully.
Newton-Smith adds that she has come back into the CBI as a female leader because she believes in the power of inclusive workplaces.
We clearly have work to do to improve our governance.
That includes making it easier for people to speak up, and supporting them, she says.
[Reminder: Newton-Smith left the CBI to join Barclays earlier this year before returning to become director-general after allegations of misconduct were reported].
CBI DG: We can, and will, be collective voice of business
CBI director-general Rain Newton-Smith is discussing today’s EGM on the Radio 4’s Today programme now.
Q: Will a basic majority in today’s vote give you a mandate to continue?
Yes, Newton-Smith replies, but the CBI wants to see as much support as possible today.
She says the “vast majority of CBI members” have stayed with then throughout the crisis, giving help, support and advice about the programme of change needed.
Those members want the CBI to be the collective voice of business, talking to government about important issues, she adds.
Q: You can’t do that work without being able to talk to the government, though…
Newton-Smith says it’s very important that to open the door to government.
Today’s about getting a vote of support, to show the CBI has its members behind it.
She says the CBI has been producing economic surveys showing what’s happening in the economy for over 60 years, and has policy experts across sectors and a “wealth of experience”, so it can be the collective voice of business.
It’s about our members and those networks of trade associations, from farmers to technology, to education.
We can and will be their collective voice.
In the cost of living crisis, hard-pressed consumers feel they are becoming the victims of food industry “shrinkflation”.
The latest snapshot of consumer activity from Barclays found households are increasingly concerned that manufacturers were reducing the size of products such as chocolate bars and packets of crisps.
Two-thirds of shoppers had noticed products shrinking in size while the price had remained the same or even increased. In response, 20% of consumers said they were switching from products that had been downsized by manufacturers to instead buy in bulk.
Esme Harwood, director at Barclays, said:
“Consumers are still paying close attention to their everyday spending, and we are seeing growing concerns around “shrinkflation” in the weekly shop.
“Many are having to forgo discretionary purchases to offset rising food prices, with clothing and restaurants most impacted.
“However, the growth witnessed at pubs, airlines and entertainment venues shows that Brits are still finding room in the budget to enjoy nights out and holidays.”
You can read about the CBI’s plans to create a renewed organisation, here, as the CBI tweeted yesterday:
Tomorrow CBI members will vote at our EGM whether they support our prospectus for a renewed CBI. Read more about our plan below: https://t.co/pr1n026Y8N
— CBI (@CBItweets) June 5, 2023
FT: CBI struggles to secure big public backing for its revamp
While in theory a simple majority would be enough to carry the confidence vote for the CBI, the Financial Times says a larger majority will be needed if the organisation is to build momentum towards restoring its credibility.
Lord Karan Bilimoria, vice-president of the CBI, told the FT:
“It has to be just over 50 per cent to carry but I’m confident it will be much higher than that.”
CBI bosses are hoping a victory will convince ministers to end their embargo on engaging with it. That might not be an immediate change, though.
As Neil Carberry, chief executive of the Recruitment & Employment Confederation, a trade association that is a CBI member, put it:
“Tomorrow is about opening up a path back rather than switching on a light switch.
CBI struggles to secure big public backing for its revamp https://t.co/DdCUsiA2ME
— FT UK Politics (@ftukpolitics) June 5, 2023
Key event
Today’s vote is a “potentially existential referendum” on the CBI, says Sky News’s Paul Kelso.
A simple majority of votes is required for the motion to be carried with the result, overseen by an independent body, expected to be announced after 4pm.
Victory would give [director-general Rain] Newton Smith a mandate to institute changes to the board and the establishment of a people and culture sub-committee, and begin the task of restoring credibility among sceptical former members and rebuilding relations in Westminster.
Defeat however would leave the CBI’s future in question.
With income already hit by the fall in membership payments and a redundancy programme announced to staff last week, the directors have already taken advice on winding up procedures if the organisation is no longer viable.
Some CBI members have voiced their support for the group, ahead of today’s vote.
Thirteen firms, including engineering giant Siemens, Microsoft and oil firm Esso, signed a joint letter published in The Times on Monday backing the CBI and its overhaul.
Updated
Introduction: CBI’s future to be decided in crunch vote today
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
The Confederation of British Industry will learn today if it has a future as the business lobby group’s members vote on a package of reforms, following sexual misconduct allegations revealed by the Guardian.
The CBI is holding an Extraordinary General Meeting in London today, where a referendum on proposed changes to its structure, governance, and culture is being held.
Voting on the CBI’s future closes today, having started last week, with one vote per member, regardless of size, after it put forward proposals to overhaul its culture and recruit a new president.
Members have been asked to vote on the following resolution:
“Do the changes we have made − and the commitments we have set out − to reform our governance, culture, and purpose give you the confidence you need to support the CBI?”
But, companies that have quit the CBI since allegations of rape and sexual harassment at the business lobbying group will not be able to attend and vote today.
New director general Rain Newton-Smith will call the meeting the “start of a new chapter”.
She will tell CBI members:
“I’m confident and determined this will be a turning point for us.
“It’s so important to me, and for those who raised their voices, to put our people, our culture and our values front and centre.
“This is a difficult but important journey. We’ve made great strides forward, but it will take real dedication. I am resolutely committed to leading that change and restoring the CBI to health.”CB
CBI president Brian McBride has said today’s vote is a chance for the group to “regain our voice on the serious economic challenges the UK faces”. Writing in the Financial Times, McBride said the outcome of Tuesday’s vote “isn’t a given”, and the CBI needs its members support.
How the meeting will work….
The EGM event will be held from 12:00 with 90 minutes for presentations and Q&A. It will be followed by a lunch and the opportunity for more private questions for those attending in person.
The result of the vote and next steps will be shared this afternoon once the vote has been verified, the CBI says.
My colleague Anna Isaac reports that the backing of trade bodies could be crucial in the CBI’s future:
Winning the backing of trade bodies, which span from farming to haulage, is seen as key to rebuilding ties with the government and the Labour party, according to CBI insiders. These bodies – rather than individual member companies – make up the vast bulk of the 190,000 firms the business lobby group has claimed to represent.
Trade associations regarded as critical to the CBI’s survival include the National Farmers’ Union, which has about 50,000 members, and hauliers’ body Logistics UK, which has 20,000. Each trade association has one vote.
But rival tanks may be eying up the CBI’s lawn.
Yesterday, a new business lobby group backed by big companies including BP and Drax was launched by the British Chambers of Commerce (BCC).
The BCC’s Business Council aims to bring together business leaders “who are looking for a different kind of representation”….
The agenda
7am BST: German factory orders for April
8.30am BST: Eurozone construction PMI for May
9.30am BST: UK construction PMI for May
Noon BST: The CBI’s Extraordinary General Meeting begins
2.30pm BST: World Bank releases its half-yearly update on the world economy
4pm-5pm BST: Result of vote on CBI’s future expected
Updated
