Richard Lambert: What business leaders want next: A growth strategy

The cuts were needed, but so is a plan for growth

(BLOOMBERG)

Richard Lambert wants to put this week behind him. "Now we've got the Comprehensive Spending Review out of the way, let's focus our efforts on growth," says the director-general of the Confederation of BritishIndustry. "The numbers will not add up without it."

Mr Lambert is thus looking forward to the CBI's annual conference on Monday, where big hitters including Barclays Bank's incoming boss Bob Diamond and the new chief at BP, Bob Dudley, will speak about how that growth might be achieved. Even more important, a Government White Paper on economic growth is only two weeks away. Though Mr Lambert concedes "the cuts clearly will be a drag on growth for many years to come", the CBI has broadly supported the Chancellor in his determination to cut spending faster and further because "the big picture is that any vision of where growth will come from needs to be set in a context of economic stability".

Businesses are yet to be convinced that stability is on its way, Mr Lambert warns, pointing to Bank of England statistics showing that many companies are hoarding cash rather than investing it. "Our sense is that there is still a fair degree of uncertainty out there and that companies are being very cautious," he warns.

What might allay their anxieties? Well, the CBI has a long wishlist – it includes an extension of the enterprise finance guarantee scheme, more help on trade credit, new sources of equity capital and non-bank finance – but the organisation is also keen for ministers to set the right tone.

"We would urge them to do more on the regulatory environment," Mr Lambert says. "If they get the right signals, businesses will create the jobs – particularly small and medium sized enterprises, which can be the real engines of job creation."

One much-debated issue is how to encourage a rebalancing of the economy, to end the increasing reliance Britain has developed on financial services in the past three decades. It is a shift the CBI favours, though Mr Lambert says the 110,000 jobs created in the first six months of this year "came from all over the place" and will continue to do so. "Manufacturers will create jobs: the productivity gains of the past 10 years have been astonishing," he adds. "There is potential in the automotive supply sector and in low carbon power generation, where there is a great deal of pent-up investment waiting for the Government to set the carbon price at a level that makes it viable." Nor does he accept that British workers have lost the skills necessary to compete in these industries on a global scale, or even that ensuring they develop further is simply a question of resources – though the CBI welcomes the Government's plans to encourage apprenticeships and further education. "We spend more per head on school education than the OECD average but have had worse outcomes," he says. "For higher education, the reverse is the case."

Still, the CBI is curious to know whether this Government, like its predecessor, will fast-track particular sectors of the economy. Vince Cable took over as Business Secretary from Lord Mandelson, who in the final months of Labour seemed to rediscover the idea of "national champions" – Sheffield Forgemasters was a case in point. In contrast, Mr Cable initially said that he simply wanted to supply the conditions for growth rather than trying to guess where it would be strongest.

That approach now seems to have been refined. Mr Cable has taken on Lord Mandelson's chairmanship of the Automotive Council, for example, and is beginning to talk of prioritising hi-tech fields such as biosciences – the retention of the science budget in the spending review was seen as both a victory for the Business Secretary and a signal of intent. "It certainly makes sense to think about where we have competitive strength," says Mr Lambert of this shift. Diplomatically, he says the business sector's first impressions of Mr Cable have been that "he is a good listener who is out and about a lot".

And what of the banks, about whom Mr Cable was once so scathing? Two weeks ago, Mr Lambert called for a ceasefire between the City and its critics. "The banks understand the political sensitivity of their compensation arrangements, particularly during these times of austerity," he says. "But if politicians just keep saying it was all the banks' fault, they'll come up with the wrong answers."

Plainly, there are questions to ask of the sector. Small companies still complain about credit availability, Mr Lambert says – especially the cost of borrowing, which is often at a margin of three or four points above the base rate. And bonuses are bound to be a running sore. Still, the CBI thinks it is time to move on – Mr Diamond of Barclays will speak next week about "reinvigorating the banking sector" rather than more controversial matters. Growth is everything now.