ANY QUOTES USED MUST BE ATTRIBUTED TO MURNAGHAN, SKY NEWS

DERMOT MURNAGHAN:
The UK’s business leaders have developed a more cautious approach to recruiting and investment plans because of a sharp fall in confidence in the economy. The CBI say most are less optimistic about the economic outlook than they were three months ago and have adopted a wait and see approach to making decisions. Well the CBI chief is John Cridland, he joins me from Leyton Buzzard, welcome to you Mr Cridland, good morning, but these are ominous signs aren’t they for the economy and the business community?

JOHN CRIDLAND:
Yes, they are, the storm clouds have darkened. It has been a year that we thought would be a lot better than it turned out to be and 60% of my members are saying the reason that things have got tougher is because of the eurozone crisis in the rest of Europe.

DERMOT MURNAGHAN:
How would they like to see that sorted? Presumably many of them rely on their export markets, their exports going to Europe.

JOHN CRIDLAND:
Yes, about 50% of British exports go to Europe so the turndown, particularly in the German market, has had a marked effect on British prospects but only about 30% of businesses have yet seen their actual business deteriorate, what has deteriorated is business confidence and given business confidence has gone, they won’t spend money on new plant, they won’t hire new staff but all of that could be turned round if Chancellor Merkel and President Sarkozy were able to get a grip on the eurozone crisis. They have never quite done enough to keep the markets happy, they need to put about a trillion euros into the stability fund and if they aren’t able, if their taxpayers won’t allow them to do that, they need to let the European Central Bank provide the finance that Italy and Spain desperately need.

DERMOT MURNAGHAN:
It’s amazing, isn’t it, how much confidence drives an economy. You get economists crunching the charts and the numbers but if employers such as you speak for at the CBI, if consumers don’t feel confident about their economic future, they stop spending, they stop investing and it all adds together to create some very difficult circumstances.

JOHN CRIDLAND:
It does. If we’d been holding our annual conference in June instead of November, I think things would have been a lot more optimistic. The summer was when confidence slid. Now the primary solution for that lies with Chancellor Merkel in Germany but there are still things the British government can do. We can’t influence the euro but we can most certainly try and help with confidence here in the UK, which is why I’m asking the British government for a bold package on youth unemployment, a bold package to get the housing market going and I want to see them helping British companies spend more on infrastructure because if we build more roads, build more power stations and wind turbines with private sector money, not with government money – the government can’t afford to do it – that will create jobs and it will restore confidence.

DERMOT MURNAGHAN:
But they will need incentives. It is the case that a lot of businesses, a lot of big businesses, are sitting on quite substantial cash piles and that survey you’ve got there about the falling confidence, all they need is to have that restored, some direction then from the government and obviously some of the structures there, and they will invest, is what you’re saying?

JOHN CRIDLAND:
I am. Let’s be clear, number one we want the deficit reduced, we don’t want government spending money it doesn’t have. Number two, the eurozone, that must be for Merkel and Sarkozy but in a few days’ time the Chancellor will stand at the dispatch box and do what is in effect a mini-budget and I think there are things the government can do there without a lot of money. They can spend a bit of money to help on teenage unemployment and apprenticeships, they don’t need to spend very much money on the housing market, what they need to do is ensure that gap between the loan and the value of the house that is not currently being bridged by the deposit. And on infrastructure, let’s have some road tolling, let’s get the A14 in East Anglia which brings about a third of our container traffic into the Midlands and the North, let’s get that widened by road tolling so that the government doesn’t have to pay, it is the money on my member’s balance sheets that pay in return for an income in future years.

DERMOT MURNAGHAN:
What about your members, they must be concerned about this issue of youth unemployment. Would you like to see some measures there because of course that is the pool through which new talent, new skills comes through.

JOHN CRIDLAND:
Business is concerned about youth unemployment for precisely the reason you say. We need a skilled workforce, we don’t need people scarred by unemployment in the early years of their lives but actually this is as much a moral and a social question as it is an economic one and it has really impressed me that at a time when business has got its backs to the wall, at a time when it could be forgiven for thinking just about paying the wages of those who are already in work, it is really worried about teenage unemployment. Think back to the riots in the summer, think back to what happened in the 80s and businesses saying however tough government, youth unemployment is something we must not let get out of hand. If we gave employers £1500 as a cash subsidy to take on a 16 year old, they might take on a 16 year old with lack of work experience and sometimes poor qualifications, rather than a migrant worker or a mature worker who have got those skills. So let’s get that young people up the beauty parade, let’s give them a chance to get a job today and not in five years’ time.

DERMOT MURNAGHAN:
I know you very seriously guard the CBI’s political impartiality but from what you’ve been saying today in terms of the government’s deficit reduction plan in particular, that seems to be the big dividing point between the two main parties, is there anything you hear from Ed Balls and Ed Miliband that you like in terms of their different strategy, their five point plan for jobs and growth? VAT cuts, national insurance holidays and indeed, talking to Ed Balls this morning, some sense that he supports your view that there should be more airport capacity in the south-east?

JOHN CRIDLAND:
Yes, of course the Labour party have got good ideas for business, just like the coalition government have got good ideas for business and Ed is trying to help with the housing market, he is trying to help with youth unemployment. Where I differ from the Labour party is that across the board cut in VAT that the Labour party supports would cost £12 billion a year to the British economy. I’d like to do it, I just don’t think the government and the country can afford it and business takes a practical view of this. This isn’t philosophical, the practical view is that we have close to Mediterranean levels of debt but our interest on our borrowing is very close to Germany. That sounds weird, the only reason with high levels of debt we can borrow cheaply is because money markets have confidence in our plan for debt reduction. If we spent that £12 billion cutting VAT I think our interest rates would go up and then my small businesses would be in even more difficulty.

DERMOT MURNAGHAN:
Practically how do you view the prospect of major public sector strikes on November 30th and maybe continuing beyond that? That’s going to have an undoubted effect on your members.

JOHN CRIDLAND:
I think the biggest problem that we’ll have on 30th November is that parents will have the challenge of finding childcare, perhaps grandparents, perhaps neighbours, so that they can get to work so some of my member companies will have to be very understanding of people making long journeys in difficult circumstances because schools are shut. Other than that, frankly I think we’ll have a bit of a Dunkirk spirit, I think people are not going to be messed around in their daily lives because of a public sector strike. I think there is sympathy in the public for public sector workers having their pensions changed because private sector workers have had their pensions changed and nobody likes that but the government has made some major concessions to make those pensions for ordinary public sector workers more generous than the first package of cuts and I think it’s time public sector workers got round the negotiating table. Where I think the public doesn’t have sympathy, it doesn’t have sympathy with disruptive strikes when negotiations are still proceeding.

DERMOT MURNAGHAN:
Mr Cridland, must end it there. Thank you very much indeed, John Cridland there from the CBI.

JOHN CRIDLAND:
Thank you.