UK: Will Clive split the CBI?

Director-general Adair Turner and president Sir Clive Thompson are at the helm of the CBI as it undergoes a transformation. Will they steer it to glory or to its grave?

The difference is noticeable as soon as you enter Centre Point, that monument to a central London speculative building boom of three decades ago which has been the home of the Confederation of British Industry (CBI) for the past 20 years.

Once, the lift whisked you from the bustling squalor of Tottenham Court Road to the top floor of the skyscraper, where the director-general's office enjoyed a commanding view across the capital. Now, however, you are directed to the second floor - one of only two the CBI now occupies in the building.

The CBI, like so many of its members, has downsized in order to adapt to a new era, of which more later. But, as its members gather in Birmingham for the organisation's 22nd national conference, held from November 1-3, most of the themes are familiar ones. How cosy a relationship should a business organisation have with the Government, particularly when that Government's policies are causing intense pain for many of its members?

How representative can the CBI be, when business in Britain is more diverse than ever before, and when the interests of, say, manufacturing may be in direct conflict with those of other sectors?

And, on an issue which threatens to split the CBI much as it has done the Tory party, how do you frame a coherent policy stance on the single currency when businesses disagree vehemently about whether they, and the country, want it or not?

If the state of relations with the Government can be judged by the number of ministers willing to travel to Birmingham for the CBI, then they are rather close. Gordon Brown ducked out of the TUC annual conference in September, pleading urgent business in Japan, but he will address the CBI. So too will foreign secretary Robin Cook, Peter Mandelson, the trade and industry secretary, David Blunkett, the education and employment secretary, and transport minister John Reid. Several junior ministers will also be in attendance.

Under the Tories, the CBI could rarely boast such a star-studded ministerial line-up. Indeed, when industry was suffering a similar overvaluation of sterling in the early 1980s, relations were very frosty indeed. Terence Beckett, the then director-general, famously told the October 1980 CBI conference: 'We have got to take our gloves off and have a bare knuckle fight (with the Government) because we have to have an effective and prosperous industry ... We have got to have lower interest rates and a lower pound.' As a tactic, it grabbed the headlines, but it also resulted in the immediate resignation from the organisation of several large members, angered by this act of disloyalty.

We can be sure there will not be talk of bare knuckle fights from the current director-general, the smooth and diplomatic Adair Turner. Like his predecessor, Howard Davies, and the leader of the Tory party, William Hague, Turner is a product of the McKinsey school of effortless networking.

For him, a quiet word in a minister's ear is worth a dozen headline-grabbing soundbites.

But surely there are parallels with the early 1980s? A new and inexperienced government is squeezing the lifeblood out of industry with the same combination of a high pound and high interest rates. The CBI itself has reported that business confidence has dropped to the levels last seen before the 1990-92 recession and that, at best, the economy is due for a growth freeze lasting six or nine months. Surely a bit of a business revolt is in order?

'Obviously there is concern in the business community about the present macroeconomic situation, which was there anyway because of the high value of the pound and the slowdown in the export sector,' Turner said in an interview with Management Today. 'On the other hand most of business is saying you can't put much of that at the Government's door.

'There are issues about the precise balance of policy - could it have been run slightly better, could one have had a tighter fiscal policy on the consumer sector last July? But most people in business recognise there were a set of reasons leading to an overvalued pound which were not under the Government's control.'

What business will want, however, says Turner, is a set of assurances from ministers that, in a difficult and unsettled environment, there will be no additional burdens on business. The CBI got a better deal than many expected out of the Government's Fairness at Work proposals on union representation and recognition and wants to make sure it stays that way as the legislation goes through parliament. It also wants no new taxes. Brown's plans to introduce a tougher North Sea tax regime have been shelved in the light of the collapse in world oil prices.

This is probably the way the Government would want it. Ministers, under pressure from their own MPs over the state of the economy, like nothing better than an endorsement from business that it is due to factors outside their control.

If anybody is going to ruffle the Government's feathers it will be Sir Clive Thompson, who succeeded Lord (Colin) Marshall of British Airways as CBI president last summer (the president and director-general have a similar relationship to that of chairman and chief executive in a business).

Thompson, the acerbic Rentokil Initial chairman, an open Tory supporter, has already established a reputation for direct, controversial talking.

'I count myself as a straightforward person,' he told Management Today, and he makes little attempt to gloss over the differences between him and the Government. 'I know the Prime Minister is very keen on labour market flexibility but at the same time a number of these costs and regulations are actually reducing that.'

At the CBI's annual dinner earlier this year, he bluntly - but, he insists, jokingly - referred to dealing with the unions as 'pest control'. Government ministers, he has said, have shown plenty of energy and enthusiasm, 'but I have also been surprised by their naivety about the way business operates'.

He says that naivety in the Government is inevitable. 'There is a very low proportion of the Labour party who have actually experienced any form of business activity prior to being elected. Politicians today, because of the nature of politics, really have to be full-time career politicians.

It is inevitable that they are not experts in business. It is inevitable that they are somewhat naive.'

As a society, he argues, Britain has much to learn from America, where business is 'almost a religion'. A key point for him is the celebration of business success. 'Building an enterprise culture doesn't happen in three, four or five years, it takes 20 or 30 years.'

The suspicion is that Thompson has been deliberately put alongside Turner by CBI members to put a little useful grit into the wheels of its relations with the Government. A strong opponent of the minimum wage, at any level, he believes the CBI was flattered into accepting a minimum wage of £3.60 an hour, while the subsequent outcry from the unions means the TUC will be well placed to gain concessions in the future.

The implication is that there will be a 'good cop, bad cop' aspect to the CBI's dealings with Labour, at least while Thompson is president.

Turner will work on the inside, taking advantage of the influence his organisation has won easily with a Government desperate to maintain the support of business. But Thompson will shout loud when the Government introduces policies that operate to the disadvantage of business. 'The CBI,' he has said, 'is not the business wing of the Labour party.'

Turner, naturally, plays down any differences between himself and his new president, although he concedes that the style has changed. 'There are different styles,' he says. 'Clive is very straightforward, and he says what he thinks. There isn't any shift in our policy. When Clive and I had our joint press conference when he became president, I don't think there was a single word he said which Colin Marshall had not said verbatim.

When we came out Clive said to me: "How do you think it will get reported?" I told him that there wasn't a cigarette paper between what we said, but the headlines in the press will be about change and splits in the CBI.

And they were.'

One of the defining characteristics of the Blair Government has been the extent to which businessmen have been co-opted onto various task forces.

Will this direct involvement of businessmen, over time, reduce the importance of the CBI as a lobbying organisation? Turner insists not. Not since the 1960s and the heyday of corporatism has the CBI been so influential, he argues.

Surely, however, this is a convenience for the Government, which enables ministers to put a business seal of approval on new policies? When the going gets tough, as it has over the strength of sterling, Brown and his fellow ministers have been quick to shift the blame onto the poor productivity performance of British business. Thompson wonders how much the Government really listens to its friends in business on the complex issue.

Turner makes it clear that, in spite of this potential source of friction, he is determined to work with the Government to improve industry's long-run productivity performance. A joint CBI/DTI exercise, Fit for the Future, has been launched, and Turner intends to make improving productivity the central theme of his conference speech. The aim will be to identify sectors where the adoption of best practice has led to a significant productivity catch-up, or even a productivity lead, in comparison with international competitors, and to spread that to those sectors which are performing poorly.

'It is genuinely unclear what has happened to manufacturing productivity over the past two or three years, but it is reasonably certain there is a long-term gap,' he says. 'We are behind America, France and Germany.

It is legitimate for Government to get people together to see why this gap is there and what we can do about it.'

But this doesn't mean the Government will necessarily get away with blaming business for not absorbing sterling's rise more successfully. 'If you go back to the short-term issue,' Turner adds, 'what everybody in business will say, even manufacturing export industry, is that the best thing for a currency is that it is stable, or even slowly going up, so it is putting relentless pressure on you to achieve productivity improvements.'

For the CBI, one of the most difficult issues remains its approach to the single currency. In the run-up to the conference, it has been engaged in a war of words with anti-EMU groups such as Business for Sterling, and the media, notably the Telegraph Group, over allegations that it has shelved a poll on business attitudes to EMU for fear it will show that opposition is mounting. This year's conference will not have a full-scale single currency debate, although the guests will include Germany's chancellor-elect Gerhard Schroder and Italy's Romano Prodi.

Thompson now thinks the issue should have been taken out of the fringe meetings and put centre stage. 'In retrospect, if we were choosing the agenda today we would have a session on the single currency.'

Previous CBI polls, some conducted in conjunction with the British chambers of commerce, have suggested majority business support for eventual British membership of EMU, although critics have suggested that the questions have been loaded to produce such an outcome in line with the organisation's generally pro-EMU stance - which has brought it more flak than any other issue. Turner insists that there will be a repeat poll next spring when the euro is up and running, and denies that the CBI is evading the issue.

'We decided not to have a big euro debate,' he says. 'We would like to get some coverage for other things. Our attitude is that Britain is not going in until 2001 at the earliest, and probably after 2002. Britain has no decisions to make at this stage.'

He concedes, however, that when the time comes for a referendum on UK membership of the single currency, the likelihood of continued opposition among at least some CBI members will limit its scope for action.

'It is very difficult for the CBI, asked for its position on EMU, to say members' opinions are so diverse we can't give an opinion,' he says.

'At the very least there will be a significant minority which disagrees with the majority.

'In that environment I very much doubt that, when we get to a referendum, the CBI can be a campaigning organisation. For the six months before a referendum, the CBI is going to have to draw back into something of a neutral position. This is a such a big issue. We can't take the money of those members who are against, and use it in a campaign for. If we didn't act in a way that respects the views of the minority, we would have groups of people who would say they wanted to leave the CBI.'

Despite representing business over a long period at the very highest tables, as a business the CBI has often been appallingly run. Since he took over three years ago, much of Turner's role has been spent in trying to put the CBI's financial house in order. Appointed as an unknown, it becomes clear that part of the reason for choosing him was that, after a succession of director-generals best known for their speechmaking, someone was needed who could get to grips with the CBI as a business.

'People had hinted to me during the interviews that I would probably have to spend a bit more time on the internal management issues than previous director-generals,' he says. One such issue was the lease on Centre Point.

The 'lease from hell' on Centre Point, as Turner describes it, was signed by the CBI in 1979, when it made the controversial move from the more traditional lobbying territory of Tothill Street in Westminster. Fired by an apparent burst of optimism about its future, the CBI took a 45-year upward-only, rent review lease of 98,000 square feet of space in Centre Point, and became the lead tenant.

According to Turner: 'Nobody said: "I'm going to take space for 500 people.

Does the CBI need 500 people?" The bottom line is that we have had had to go through a process of restructuring to ensure that we are in a sound position. We only need 45,000 square feet. The CBI's role has evolved over the last 18-20 years. We've moved out of that corporatist role as part of an apex of national collective bargaining which existed in the 1970s.'

The restructuring has involved a 25% reduction in staff numbers to 200 or so, although Turner says those who are left are paid better. It has also required the larger members of the CBI to pay six years of subscriptions up front, allowing the organisation to buy itself out of the crippling Centre Point lease, which also involved huge repair and maintenance bills and, after 1996, sub-letting floors at a loss. Hence the more modest CBI of 1998 - with just the first and second floors of a 15-storey building.

Its remaining two floors have been refurbished - the offices used to look like a 1970s local authority building but can now pass muster as the headquarters of a modern commercial organisation. Even the computers are new.

But the result is that the CBI is in debt to its larger members, to the tune of around £5 million, and, under the plan agreed with them, must turn in a profit of £1 million a year or more - from conferences, publications and members' subscriptions - to pay it off. So far, things are going according to plan.

Despite grumblings from some members about the CBI's stance on the euro, and about the degree to which it is representative of business as a whole, and not just industry - some retailers were unhappy with its calm acceptance of the minimum wage - the membership has held up. Subscriptions are currently rising faster than inflation.

This, of course, may not last. The 1980-81 recession made the plans of Turner's predecessors look crazily optimistic. As entire sectors of industry were wiped out, so the CBI's membership base shrunk. It could happen again. The current CBI, says its director-general, is flexible enough to cope with a membership downturn, but there are limits to how much an organisation of this type can downsize and remain effective.

Then there's the euro. An issue that has split political parties could easily have the same effect on the CBI, despite Turner's pledge of a non-campaigning role. Rival organisations such as the Institute of Directors, which have pledged their opposition to EMU, are ready to grab any anti-euro pickings.

Not for the first time, the CBI - currently enjoying a revival under Labour - has to steer a careful path. If it gets too close to the Government, the risk is that it will be seen as a political patsy and be dragged down when, as is inevitable, the Government's popularity wanes. If it is too enthusiastic about the euro, it will be seen as not speaking for the whole of British business. And meanwhile, like any business, it has to make money.