Michael Moore's Outlook on the growth agenda

The two-part test of any comms strategy is that a core message has landed with its audience, and then had a positive effect. Whether it is selling the apocryphal tin of beans or getting people to vote for a political party, this always applies.

It is an old adage of political campaigning that voters rarely register a key message until some time after the politicians are bored repeating it. And even then, who knows what the reaction will be on election day?

Certainly that was my experience in my first election in 1997 when the ‘penny on income tax to fund education’ mantra of my party was eventually played back to us on the doorstep. Happily, it turned out they liked the campaign idea, so it was worth the wait.

That experience showed me that keeping the message simple and the promise appealing are rather important elements of the comms approach, too. And this year in the UK we have seen that borne out once again, this time in a key area of the public policy debate.

‘Growth, growth, growth’ was the 2024 theme from the main political parties. And it has been at the heart of the new government’s programme ever since. The international investment conference, the Industrial Strategy, the Budget and the Mansion House speech from the Chancellor all made this their central focus.

As part of the audience for that message (varied to ‘invest, invest, invest’ from time to time), private capital welcomed the parties’ commitment to deliver growth-oriented programmes. And in particular the recognition that private equity, venture capital and private credit were core to the mission. The positioning of the Budget decision on the taxation of the industry borrowed heavily on this understanding that actively managed investment in high growth companies is vital and gives the UK an advantage .

Meanwhile, the scale of the task was evident from the official growth forecast accompanying the Budget. From ‘close to zero’ in 2023, the Office for Budget Responsibility anticipates growth this year of just over 1%, then 2% next year, before receding to approximately 1.5% in the years after. The margin for error is not huge.

As I mentioned last month, the decision on carried interest (subject to working through the planned switch to treating it under income rather than capital gains tax) was made by the Labour government in the knowledge that international competitiveness was essential to the continued success of the UK industry.

But since the Budget a number of measures (such as other changes to the capital gains tax regime and the employer national insurance increases) have proved challenging to absorb. There is no question that the additional costs to business have sat uneasily with the overarching growth theme.

The Chancellor addressed this issue head on in a statement to a major UK business conference in late November: “…I’m really clear I’m not coming back with more borrowing or more taxes… You can be confident we’re not going to have to come back again and do another Budget like this.”  That matters.

Meantime, other key reforms to enable and catalyse investment are in the pipeline. Planning, energy and pensions are all to be reformed. Indeed, the planned reform of workplace pensions and the regional public sector schemes in the UK are radical in intent. This is an area we are particularly supportive of as we look to increase the scale of capital available from the UK itself to invest in the high growth economy in which our industry successfully spends its time.

Add to these plans the enhanced mandates which add growth as an objective for the Financial Conduct Authority and the competition regulator and further substance has been added to the election mantra.

There has been no pause in the induistry’s engagement on these multiple fronts since the Budget, both in terms of the consultation on the tax changes and private capital’s contribution to delivering  ‘growth, growth, growth’.

How will all this work out? Back in the day the ‘penny on income tax’ was a rather less important message than the growth message today. But the cautionary experience then was that rather a lot of voters were sceptical, while others took it as a literal statement (of a penny more tax, not a change in the rate…). So, even an apparently clear message can land in the wrong way.

The current growth message drives rather more complex responses as we have already seen. For our part we will be working with the government to ensure it delivers effective responses. But both sides of the ‘partners for growth’ will need to work hard to ensure that it does.

Michael Moore
Chief Executive, BVCA

This article was originally published on 5 December 2024 on the Private Equity News website here.