The CBI may need to break up to survive

If there was much sense of satisfaction at CBI headquarters last week, it could be shortlived. 

The business lobby group won a vote on its recovery plans following the harassment scandal that sent big-name members fleeing. But new boss Rain Newton-Smith faces a mauling at a parliamentary hearing this week. And although some members, notably trade associations, have expressed their support, their backing still sounds decidedly conditional. 

For believers in the need for a cross-economy business voice, no real alternative to the CBI has emerged from its crisis — including the national council announced last week by rival lobbyist, the British Chambers of Commerce. That looked opportunistic. The regional structure and more limited resources of the BCC doesn’t make it an obvious succession candidate.

The CBI has in effect won breathing space. But it still faces challenges — beyond persuading anyone in government to talk to it — in mounting a sustainable comeback.

First, there is a question of credibility. Newton-Smith will face questions about the group’s handling of the harassment allegations and the dismissal of former boss Tony Danker — both of which are still keeping ex-members on the sidelines.

The group’s brave new dawn of a transparent, open CBI has been unconvincing. Everyone knows its claim to speak for 190,000 businesses is misleading, given 99 per cent are via its trade association members. Talk of 1,500 direct members (pre-crisis) was probably already too high. The turnout of 371 votes last week was perhaps a third of the electorate, according to market chatter. Either way, the longstanding secrecy about membership is going to dog the group until they get over it and publish some figures.

Second, the CBI needs to reshape itself in a hurry. Its prospectus for renewal was stronger on cultural than operational change — and like it or not, a scandal over workplace wrongdoing has become a debate over CBI strategy. Its existential crisis prompted members and policymakers to consider without sentiment which bits they really cared about.

One proposal floated a few weeks ago — self-styled as a “good bank / bad bank” carve up — planned for manufacturing group MakeUK to take over the CBI’s prized macroeconomics unit, suite of surveys and a few other crown jewels. This idea appears dormant and the banking analogy isn’t terribly apt: the CBI doesn’t have toxic assets in the way banks did post-2008.

But it emphasises the need to pick its core strengths. Some believe rebranding, restructuring or even a merger is needed to draw a line under the crisis. “CBI 2.0 is hard,” said one large company that has suspended their membership. “How do you get a fresh start and take the best bits forward? That might be the answer.”

The organisation, which has started a redundancy process, will shrink regardless given its financial straits and its third challenge, to demonstrate value for money. The pressures are set to increase: some members are preparing to ask for a refund, or extension to their year’s membership, for the period the CBI’s activities have been suspended. 

Life has gone on as the organisation has floundered. The Recruitment & Employment Confederation took the CBI’s traditional spot at the UN international labour conference last week. The biggest corporate members, who can pay upwards of £160,000 a year and are crucial to the organisation’s finances, seem unlikely to come back on board at that sort of price — not least when wannabe alternatives like the BCC charge fees of £65,000.

Time is working against the CBI. There is no urgency for big members, suspended or current, to make decisions before their renewals come due in the autumn or towards the end of the year. But the CBI desperately needs quick wins to get back in the room with the government. Its own milestones look testing: a key test it has set itself is to show its influence on the Autumn fiscal statement — a tough ask, and one that probably requires being back in the mix by September. 

Businesses may still want the CBI but not in its past form. It now has to carve out that new shape clearly — before someone else forces the issue.

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