‘We cannot tax our way to growth,’ says CBI boss Rain Newton-Smith

Rain Newton-Smith, the chief executive of the CBI, is an economist by trade, so she understands all too well the perils facing UK businesses, which were bad enough even before Donald Trump’s war with Iran.

The International Monetary Fund (IMF), where she worked in Washington DC, has just downgraded its forecasts for Britain, warning we are likely to fare worse than similar developed economies.

In a formidable list of problems facing firms, energy costs loom large.

The CBI wants to see reliable, affordable, low carbon energy supply, and firms, she says, need some respite from ‘policy costs’, or in plain language, the amounts piled onto bills by the Government in the push for greener energy. She says: ‘Policy costs are making our businesses uncompetitive and vulnerable in a crisis.

‘Before the war in Iran, we already had very elevated energy costs for firms. Electricity prices for industry are around 60 per cent higher than other advanced economies.’

As well as hurting UK businesses, it is acting as a brake on foreign investment in the UK. Evidence of this came recently when the US giant OpenAI put on hold plans for a data centre, citing high energy costs.

She says: ‘Rightly, there has been a lot of focus on households but we don’t hear enough about how businesses are impacted by those high energy costs. We are saying to the Government to use this moment to think about lasting solutions.

‘We could take policy costs off electricity bills for industry. For an average medium size business, these are around 20 per cent of the electricity costs they face.’

As for President Trump’s call on the UK to ‘drill, baby, drill’, she says North Sea oil and gas is ‘absolutely part of our energy transition’. She criticises the energy profits levy, arguing it can deter extraction from existing fields.

Newton-Smith, 50, spent nine years at the Bank of England working on global economic forecasts for the committee setting interest rates.

Her father was Oxford philosopher William Newton-Smith and her mother, Dorris Heffron, is an author who wrote a children’s book called Rain And I about two teenage girls growing up in Toronto.

Newton-Smith’s style is unshowy, but it is thanks to her crisis-management abilities that the CBI is still here at all.

She took the top job after the sacking of Tony Danker in 2023 in a wider scandal over sexual misconduct. The CBI, which subsequently settled a legal action he brought for wrongful dismissal, suffered huge damage to its reputation. At the time, some thought it might not survive.

The organisation is now led by women, a development that has happened without fanfare.

In the chair is Cressida Hogg, who is also chairman of BAE Systems. The board has a majority of female directors, plus Louise Hellem in the key role of chief economist.

Having so many women in senior positions should, Newton-Smith says, mean the organisation is open to helping break down barriers for female business leaders and entrepreneurs. Another little-noted development is, she says, that Britain is defying the ‘tech bro’ trend where men dominate the top roles.

She cites top female tech bosses such as Kate Alessi and Debbie Weinstein at Google, Nicola Hodson at IBM, and Dame Clare Barclay at Microsoft.

‘We have some amazing female leaders in tech in this country,’ she says. ‘We should celebrate them. We should celebrate all the business leaders who wake up every day trying to solve problems and taking risks.’ She adds: ‘Profit is not a dirty word. It is how you make sure you have resources to invest and create jobs.’

Although Newton-Smith is far too discreet to say so, one suspects ‘profit’ is indeed a dirty word in some Labour circles.

As well as high energy costs, the tax burden on business is at historic highs.

‘We cannot tax our way to growth,’ she says.

Employers fear Labour’s plans to boost workers’ rights, including Angela Rayner’s new ‘jobs police’ who will have powers of arrest, use of ‘reasonable force’ and seizure of documents. Diplomatically, Newton-Smith calls for a ‘more pragmatic’ approach on workers’ rights and on increases in the minimum wage, which is making it more expensive for firms to hire new staff.

A mother of four, she worries that Labour’s plans to clamp down on zero hours contracts could go too far and result in fewer opportunities for young people to gain skills and a start on the career ladder.

‘I have teenagers, I want them to find jobs and I would love them to have a flexible hours contract. My first job was in hospitality making coffee. The danger is that we put the burden [on employers] too high and you could end up with fewer flexible roles that people really value.’

High youth unemployment, with almost a million NEETs – not in education, employment or training – risks ‘huge scarring effects’ on those young people, she says.

‘Any parent of teenage children – you just want them to get experience. If I look at my teenagers, they need to learn skills in a place of work,’ she says.

‘But you are asking a lot of an employer to take on a teenager with no work experience versus an adult with more experience of life. There is so much more [the Government] could do if [they] lower the costs of doing business and make it easier for entrepreneurs to set up shop, to create jobs, to invest.’

The CBI, which celebrates its 61st birthday this year, was founded in a very different era. Back then, most of its members were big manufacturing employers and no-one had even thought of the internet, let alone AI.

Newton-Smith argues the organisation is still relevant.

‘We are the voice of UK business across all sectors. The majority of our members are in the service sector now because we represent the UK economy as it is, whether that is creative industries, or business and professional services where the UK leads the world. We have these amazing start-ups that are scaling up.’

Newton-Smith may be the epitome of tact, choosing her words with care, but her warning is unmistakable: pile on costs, taxes and excessive regulation and growth will be the casualty.

War abroad is beyond Britain’s control, but what happens to our businesses here is not.