The UK's new government and responsible business

Business has already received significant attention in Keir Starmer’s new government elected only four days ago. It was quickly announced that the former minister Douglas Alexander would join Jonathan Reynolds in the Department for Business and Trade (DBT). James Timpson – one of the UK’s best known business leaders – will serve as Prisons Minister given his family’s commitment to hiring ex-offenders. Patrick Vallance, a leading scientist and pharmacologist, is now the Minister of State for science, innovation and technology. Jonathan Reynold’s was chosen to lead the airwaves over the weekend promising “a transition that works for working people” including for the Port Talbot steel workers.

The new Labour government is placing many expectations on business to grow the economy, on the one hand, but also to act more responsibly on the other. Great British Energy will be capitalised at £8.3 billion but will require at least three times this from private sources if the UK is to decarbonise its electricity by 2030. The streamlining of planning laws will only have its desired effect if the construction, infrastructure, and energy sectors stand ready to step in and invest at a time when many other governments worldwide are hungry for similar investment.

The DBT will also now inherit Labour’s commitments on worker rights. Raising the minimum wage, banning zero-hour contracts, and ending fire and rehire, will not cost the government much in financial terms but will impact the bottom line of many small and medium-sized enterprises. The department also inherits the previous governments bilateral trade agreements, such as those with Australia and New Zealand, which threaten to undercut British farmers with less stringent environmental and animal welfare standards. Again, not a pressing concern for the public purse, but a significant potential impact on our economy. Sometime soon, the new government will need to join up the dots in a national industrial strategy.

David Lammy, the new Foreign Secretary, has long mused about rekindling an ethical foreign policy. Easier said than done when many British embassies have been incentivised to place trade above most other considerations over the past decade. Brussels has been much busier than London in defining the rules for responsible business. If the UK wants to come closer to Europe on trade, then it will need to align on its environmental and social reporting and due diligence standards for its companies. Social and environmental risks are now material to many British exports, and the UK Government will need to rise to the challenge to make sustainability a pre-competitive issue through export guarantees and the de-risking of investments.

A central challenge for the new ministers is to align the pro-growth and pro-responsibility strategies and avoid the zero-sum arguments that have dogged Whitehall’s approach to business over recent years. Business will step up to greater non-financial responsibility if it believes government is serious and joined-up in its approach, offering real incentives whilst penalising companies who abuse the rules.

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