POLITICS

With the New Year came an interesting symptom of new thinking in British industry. Early in January cement giant Blue Circle announced it had struck a deal with two of Britain’s biggest trade unions, the GMB and the TGWU, offering its employees five years of job security in return for pay restraint and flexible working practices. This was a highly significant agreement and may turn out to be one of the clearest signs yet of a sea-change in the UK’s corporate culture.

Just what kind of change is taking place, and how desirable it might be is open to dispute. The Blue Circle settlement drew a large amount of media commentary, with some observers taking a wholly negative view.

Even with the Conservatives still in office and the election a little way off, the predictable and easy line of attack was that this sort of thing reeked of the 1970s era smoke-filled rooms and failed corporatism that attempted to buck the market.

To be fair, there is a reasonable case to be made out that Blue Circle is taking a risk. It is easy to form a compact of the kind it has at this stage in the economic cycle, when a recovery is gathering pace and more rather than fewer employees are liable to be needed. Moving to put a lid on the wage bill at such a time must have looked attractive to the cement group’s management. Should the economy take an unexpected downturn, however, the wisdom of the thing may look less and less clear.

But the critics who advanced this case missed the point. For one thing, Blue Circle’s innovative approach was a recognition that job insecurity has become an issue which both politicians and managements are compelled to address. Aside from the wider questions, this insecurity has a direct economic cost to firms and their shareholders. In Blue Circle’s case, the firm said it wanted to remove the deterrent to its workers advancing ideas for greater efficiency which might jeopardise their employment, pointing out that its 124 truck drivers had, over a year, produced cost saving ideas worth #1.2m.

More significant, though, was that this deal may be a sign of a gradual but accelerating shift in the business agenda in Britain. As a change of government looks more and more likely, business seems increasingly to be moving towards Labour thinking.

Of course, Labour has been working hard to bring this about. Its spokesmen have been in and out of boardrooms selling its message for years. (Michael Heseltine once joked of the opposition party’s “prawn cocktail offensive” to woo the City that “never have so many crustaceans died in vain”. Now it looks like the prawns may have been sacrificed to some purpose.)

The message too has itself been changed to be more appetising to industry and commerce. Blair has distanced his party from the trade unions and worked with the shadow Chancellor, Gordon Brown, to forge a macro-economic policy that is as ruthlessly orthodox as the Government’s. He has minimised the real impact of the national minimum wage and his plans to sign the European social chapter.

Last month, Blair’s campaign to secure the support of the City and the wider business community had already moved into top gear. The importance he attaches to it is clear. As one of his closest aides puts it: “It is hugely important that business in the election does not do what it has traditionally done which is inflict as much damage as possible on Labour …”

To secure that objective, the Labour leader is holding a series of high-profile meetings with businessmen, among them foreign investors, younger entrepreneurs and representatives of 40 of the FTSE 100 companies. The process is due to culminate soon with publication of Labour’s “Business Plan for Britain”. In the run-up to publication of that document, some of the country’s foremost industrialists have already set out in great detail the agenda they hope Labour will pursue.

Promoting Prosperity, a report published under the auspices of the pro-Labour think tank, the Institute for Public Policy Research, was drawn up by a commission whose membership included Bob Bauman, chairman of British Aerospace, George Simpson, managing director of GEC, Sir Christopher Harding, chairman of Legal & General, and David Sainsbury. Those endorsing it included Sir Ronald Hampel, the ICI chairman.

To some extent, the willingness of such leading figures to become involved in this exercise is a case of informed self-interest or realpolitik. With Labour still enjoying a commanding lead in the polls and still no sign of an eleventh hour recovery by the Conservatives it is natural for business, like other groups, to seek to maximise its influence on the probable next government.

But this report is evidence too of a more genuine and principled meeting of minds. The business leaders argue that the deregulation and market liberalisation pursued by the Government is no longer enough and call for a “new partnership between business and government”. Blair, for his part, says the report “sets the business policy agenda for the next decade”.

With that in mind, Promoting Prosperity is worthy of examination. This is not to say that it should be read as a proxy statement of Labour policy – it is not. Much of the report is congenial to Blair and his colleagues and they have been delighted by its endorsement, albeit hedged, of the social chapter and minimum wage. Some of it, though, may be too strong medicine to be advocated by Labour this side of forming an administration.

If Labour does win, however, expect to see even some of the more far-reaching ideas canvassed in this analysis given real consideration by the new government. How about, for example, the proposal for a Council of Institutional Investors to monitor underperforming companies. It would, suggests the IPPR commission, publish a list of those firms in which it lacked confidence, providing an incentive to failing management other than the threat of a falling share price and ultimately a takeover.

Another intriguing proposal, designed to boost investment, is for the introduction of an Allowance for Corporate Equity scheme, allowing companies to deduct the normal cost of capital on shareholders’ equity from their taxable profits.

For now, such schemes may be no more than talking points. But what is important in all this is that Labour and business are not just talking but talking seriously and in detail. As with Blue Circle and its job security deal, the direction of business thinking in Britain is evolving fast.

It is a trend every executive ought to be tuned in to.

Gary Duncan is economics correspondent of The Scotsman.