CBI chief: do dig Stonehenge tunnel; don’t pull up drawbridge to Europe

John Cridland wants to talk about Druids. The man who leads Britain’s premier employers’ group is worried by the state of the eurozone. He is nettled that the string of scandals in the City is making it harder as director-general of the CBI to make the case for pro-business policies. And he is eagerly awaiting the moment at which a growing economy will translate into higher wages.

But the Cambridge historian is most passionate when he gets on to talking about the need to end the gridlock around one of Britain’s main tourist attractions. “If I could have one wish from George Osborne in this year’s autumn statement it is that he would agree to a tunnel under Stonehenge.”

Speaking ahead of the CBI’s annual conference on Monday, Cridland says there have been plans since 2002 to upgrade the A303 but objections from English Heritage, the National Trust and the Druids for whom Stonehenge is a sacred site have meant the traffic jams in rural Wiltshire have continued. In recent weeks, ministers have said they would look at a tunnel, something Cridland says would cost a little more than £1bn.

“There are two glorified car parks in Britain”, the CBI leader says. “One is the A14 in Cambridge. The other is Stonehenge. The A303 is a key arterial route from the south-west to the metropolis. Just get on with it.”

Improving the UK’s infrastructure is just one of the items on the CBI’s wish list for next month’s autumn statement. He wants Osborne to commit to a £250,000 annual investment allowance for the whole of the next parliament at a cost of £670m a year from 2016-17; the extension of the research and development tax credit to include more development spending at a cost of £310m a year; and for the Treasury to use the consumer prices index rather than the retail prices index for the annual uprating of business rates. Since the CPI measure of inflation is lower than the RPI measure, that would cost the Treasury £320m a year.

Cridland is generally upbeat about the state of the UK economy, although in the past few months he has become concerned about the impact of a weak eurozone on the prospects for growth. For the first time, the CBI is urging the European Central Bank to use quantitative easing to boost activity in the 18-nation single currency area.

“Two months ago I would have said the UK is growing at 3% a year, that growth is broadly based, that it is service-sector led, small-business led, with plenty of opportunities around the world and business investment increasing.

“I still say that about the British economy. I do think it is set fair but I am more bothered about the eurozone. I sense the eurozone is slowing. Spain is on the up but from a low base. Italy is not out of recession. France is growing very little and is almost in denial about the need for structural reform. Germany is slowing rapidly. The headwinds are stronger than they were before the summer.”

Cridland insists, however, that Britain should not give up on Europe. Those who suggest the UK should leave the EU in favour of forging closer links with those parts of the emerging world that are growing faster are “fundamentally wrong”, he says. “It is not a question of either/or, it’s both.”

UK firms have been doing well in countries such as China, where exports have doubled in recent years, but Europe remains a key market. “Our exports to the Netherlands are higher than for all Bric (Brazil, Russia, India and China) countries combined. I don’t consider the eurozone to be a foreign market. It’s a home market. It is our back garden.

“What the sceptics need to know is that our role is to be an advanced economy that services other advanced economies. We need to grow our exports to Europe as well as seizing opportunities in other markets.”

Cridland says he is confident the UK can emulate Germany and be a leading exporter by concentrating on the sectors where it is strong, such as upmarket consumer goods and financial services. He wants links with Europe to be strengthened by making it possible for all UK undergraduates to spend one year studying in another member state. “The eurozone is not moribund. Policymakers have saved it. Now they need to find a growth path.”

Germany and France, he says, should both agree to structural reforms. The Germans would reflate and invest in infrastructure in return for the French introducing reform of pensions and the labour market. The third leg of the programme would be for the ECB to move from “QE-lite” to the real thing. “It [the ECB] needs sooner or later to buy government bonds. That could get the European economy moving again.

“European leaders have got a track record of doing the right thing. Sometimes it takes a bit too long”.

The CBI’s new offices above Cannon Street station, in the heart of the City, have taken the organisation closer to the sector of the economy that has recovered fastest from the crash but has also seen its reputation damaged by a series of market-rigging scandals.

Cridland does not seek to deny that business has suffered as a result. “It has become harder for me in my role as the representative of business to make the argument for pro-enterprise policies. I did not think that I would have to fight the battle for open markets, but I do. It will be hard to win those arguments unless we put our own house in order.”

Companies, he says, should be transparent, rather than burying their tax arrangements deep in the small print of annual reports in language that can only be decoded by trained accountants. “What I would say to our members is that you should take a look in the mirror. If you don’t like what you see, change what you do. If you do like what you see, explain what you are doing”.

Cridland says that one of the reasons business is currently held in low esteem is that those running companies have been richly rewarded at a time when real incomes for the rest of the population have been squeezed hard. He welcomes increased shareholder activism, which he says is forcing company boards to set a positive example.

And he believes that the end of the longest squeeze on real incomes since the mid-Victorian era is in sight because increased business confidence has led to a pick-up in investment. Higher capital spending will lead to a rise in productivity, which will then boost wages.

“Average earnings are currently growing at around 1% a year. They will be growing at double that rate next year and at treble that rate the year after”.

“A wage increase has to be productivity driven. But I hope 2015 will see the wage increases I expected to see this year.”