Yesterday, the Confederation of British Industry (CBI) issued a warning to Labour’s chancellor Rachel Reeves that growth expectations amongst UK companies have taken ‘a decisive turn for the worse’ and that business confidence in the Labour government’s pledge to grow the economy has plummeted since her autumn budget.
The doom-laden message from the CBI highlighted all three major sectors of the economy – namely services, manufacturing, and wholesale & retail – reporting falling orders, falling sales and cutbacks in output.
According to the CBI and the London Chamber of Commerce and Industry (LCCI), what was an economic disaster has been accelerated by Reeves’ budget with its proposed increase in National Insurance (NI) contributions paid by the employer for every worker they employ.
This increase in NI contributions was necessary, according to Reeves, to help fill the £22 billion black hole in the economy she only discovered after Labour was elected.
The LCCI said it acknowledged that Labour needed to take tough decisions to help fill this hole but believed that the increase in NI (which they regard as a tax on business despite the fact that it will be passed on to workers through cuts to wages and jobs) along with Labour’s proposed Employment Rights Bill has created a ‘perfect storm’ for companies in the capital.
The proposed Employment Rights Bill is hated by the bosses as it includes the right of workers, from Day One of their employment, to universal sick pay, restrictions on zero-hours contracts and an end to the bosses’ right to fire and rehire on lower wages.
In fact, it was only included in Labour’s election manifesto as a fig leaf to be used by TUC leaders to attempt to delude workers that a Labour government would not be exclusively a business government.
Now the CBI is declaring that even these meagre changes to employment law must be dumped, that the full force of the recession must be loaded onto the backs of workers and that Labour must hit the working class harder.
The crisis that is driving recession in the UK is unrolling throughout the EU, with Germany recording the fastest drop in manufacturing output and Italy’s factory sector shrinking at the fastest rate in a year, while France recorded the steepest contraction of manufacturing in 10 months.
Both Reeves and Keir Starmer have been desperately calling for closer relations and for stronger economic ties with the EU as the salvation for British capitalism especially following the threat that Donald Trump will impose trade tariffs and carry out a global trade war on day one of his presidency on January 20.
However, there will be no salvation for British capitalism in ‘closer economic ties’ with the EU, just a union of bankruptcy and recession.
Meanwhile in the United States, Trump ramped up his trade war threats on Saturday, pledging to impose 100% tariffs on any country or group of countries that challenges the supremacy of the US dollar.
Trump is aiming to crush the rise in countries, led by Russia and China, proposing to move away from the dollar and carry out trade in their own or other currencies.
This trend has been accelerated by the ‘weaponisation’ of the US dollar which, according to the International Monetary Fund, is used in nearly all international trading, including crucial oil and crops.
Former Tory Chancellor Norman Lamont said that if a separate banking payment system is created then international sanctions on US enemies would be rendered useless and this would be a ‘major threat to the Western-led financial system.’
In fact, the economies of the capitalist world are already reeling, crashing into recession and slump, with the US now declaring war on its rivals and even those countries which have slavishly supported its wars in the past.
With capitalism breaking apart with international trade wars and economic collapse, the time has come for the working class to force its trade union leaders to put capitalism out of its misery by organising general strikes to bring down their governments and advance to workers’ governments and socialism.
Socialist revolution is the only solution to capitalist crisis.
