American investors spooked over Starmer's impact on costs and taxes

Shadow chancellor Rachel Reeves has given away one facet of Labour's manifesto due out on Thursday. She wants to "reform the business rate system in a way that reduces the costs for small businesses and high streets, ensuring that some of the big multinationals and tech companies pay their fair share”. That seems OK. Unless you’re a big multinational or a tech company – in which case, you may well have been brought up short by her comment. It was there, no ifs and buts, you’re going to be paying more. Ms Reeves would suppose her remark was fine. Her main aim, after all, is to win the ballot, to achieve power, and there are more votes to be had in pleasing Britain’s myriad small businesses and town centres than appeasing big business. A cannier politician might not have chosen to be so forthright. It goes without saying that for every winner there is a loser , but sometimes it pays not to identify the latter, best leave it unsaid. Most of the time, Ms Reeves and her senior colleagues do just that, preferring to speak in vague, non-specific terms about their likely prey should they win the election. Occasionally, though, we’re afforded a glimpse into their thinking. Labour has gone out of its way to court the City and large companies, assuring them they have little to fear. They know everything will be hunky dory under a new government. But do they, really? Keir Starmer, the Labour leader, unveils the policy manifesto on Thursday but we are told to view it as a baseline for government not the full playbook. City suspicions of Labour run deep. So yes, it’s true that Keir Starmer and Ms Reeves have done a good job in wooing the capitalists. That’s not to say, though, that the doubts don’t persist, that underneath the bonhomie, Labour is no friend of business and worse, sees the leading practitioners as the enemy. In their approach, the would-be prime minister and chancellor have stressed they’re not about to raise corporation tax and they’ve even gone further and said it could be reduced to boost international competitiveness. That was pleasantly welcomed. But it’s what they’ve not been saying that is also causing apprehension. They don’t discuss new labour laws, enshrining the rights of workers, long a clarion call of their trade union financial backers. Neither do they mention hitting energy suppliers with higher levies or increasing employment taxes, such as National Insurance. They do stress repeatedly that the public finances are tight, there is no spare money in the kitty. This inevitably invites the conclusion that extra cash will be stumped up by the private sector, by business in some shape or form. While there is precious little domestic firms can do to avoid additional charges, there is something foreign investors can do, which is to reduce the amount they earmark for the UK or not come at all. Worryingly, for Labour and for the country, there are signs of overseas companies reading between Labour’s lines and not liking what they’re seeing. Leading transatlantic trade association BritishAmerican Business said its members are afraid of rising costs if Labour reach Downing Street. “There’s concern about a potential rise in the cost of doing business in the UK,” said BAB chief executive Duncan Edwards. His organisation represents more than 400 companies doing business in both the UK and US – among them Amazon, McKinsey and Delta Air Lines. Another member is Microsoft, which has already discovered how it’s not only taxes that can hurt. Last year, Microsoft felt the opposition of the UK competition regulator when the watchdog unexpectedly blocked the computer giant’s $75 billion takeover of games creator Activision. The deal only went ahead after Microsoft amended its bid. The episode resonated around the corporate world, the implied message being that if you’re foreign you can expect tougher treatment in the UK. If you’re a foreign investor considering pumping cash into the UK, that is precisely the sort of move that would give you pause. Likewise, agitating trade unions and a new government, one that if it secures a crushing majority could believe it had been afforded licence to bring in new policy measures and laws that will displease business. It could be that Europe is off limits, for a while at least. The rise of the right is bound to raise the spectre of greater protectionism. Britain, of course, is heading down another path – although the European swing is driven by concerns about immigration, an issue that features prominently in the UK. Arguably what the European shift shows is that if the Tories had a better leader, they might by now be in a different space. Indeed, the European mood could embolden the UK right, fuelling as if any more were needed, the ambitions of Nigel Farage. Overseas investors may well take fright from choosing the EU as the best location for their money, and that includes the UK. Just when the UK seems a more attractive proposition, with Europe heading for political turmoil, and animosity towards foreigners rearing its head, Labour could return to government. That could still be a green light for greater foreign direct investment in the UK, but only if those investors are certain they will not be targeted. It could well be that with elections and upheaval now taking place right across Europe, investors put decisions on ice, at least for a while.