(Nov 11): UK Chancellor Rachel Reeves will champion free trade and economic growth in a keynote speech this week, as Labour faces pressure to both pre-empt protectionist trade policies expected from the incoming Trump administration and to reassure businesses facing a higher tax bill.
In her speech at the Mansion House on Thursday, the chancellor will detail the government’s next phase in its plan to accelerate growth by partnering with the financial services sector and reforming pensions to unlock billions of pounds in investment. She will also say free and open trade is what makes countries richer, in a warning against Donald Trump’s threat to slap tariffs of as much as 20% on imported goods, according to a preview of her remarks.
“I have never been more optimistic about our economic potential,” Reeves will say in her speech. “We can go for growth...growth brought by unlocking private-sector investment, including in our financial services industry. And growth brought about by reform — both of our economy and of our public services.”
Reeves is banking on forging partnerships to realise “untapped potential” and continued partnership with the US and other regions, even as Trump’s victory in the US election last week complicates this path. The president-elect has promised to impose stiff tariffs on imports into the US, a move that will likely upend global trade and hurt European companies exposed to the massive market. He is expected to cut US corporate taxes, deregulate the financial industry and drill for oil.
Trump’s stance poses a conundrum for Prime Minister Keir Starmer as he works to repair post-Brexit economic links with Britain’s European Union neighbours and pursues a thaw in ties with China following years of tensions over Covid-19, Hong Kong and hacking allegations. The US is Britain’s biggest single market for imports and exports — trade between the nations totalled more than £300 million (US$387 million or RM1.71 billion) in the year through March — and preserving that may involve trade-offs in other relationships.
After several stumbles with businesses since winning power in July and a divisive budget that ramped up taxes and borrowing, the Mansion House speech is a chance for Reeves to turn the corner on Labour’s relationship with the finance industry. The speech at the Lord Mayor of London’s official residence is traditionally the chancellor’s biggest forum to announce policies to support the City’s financial industry.
It comes as Reeves is also facing mounting pressure to water-down her decision to increase taxes on businesses in her budget last month. More than 200 bosses in the hospitality sector signed a letter warning her that a planned hike in employer national insurance contributions would force businesses to “drastically cut jobs” and put some at risk of closing down.
The moves, along with changes to the national minimum wage, could cost hospitality £3.4 billion, according to the letter. The group proposed the creation of a new national insurance band with a lower rate of 5% for those earning between £5,000 and £9,100, or of an exemption for those working less than 20 hours a week.
“There is no capacity to pass the costs onto customers,” UKHospitality chief executive officer Kate Nicholls wrote in the letter. This will force businesses to reconsider investment and “drastically cut jobs”, she added.
Reeves will use her speech to insist that “tough choices” over taxation can offer stability for businesses in the long-term, which can in turn unlock economic growth. That’s despite the fiscal watchdog forecasting underwhelming economic growth projections even with a record £40 billion tax rise.
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