The CBI has come under disproportionate scrutiny after a misconduct scandal that pushed the UK’s most prominent business lobby group to the brink of collapse this year as companies cut ties, its chief executive has said.
The organisation has been fighting for survival since April following claims of serious sexual misconduct internally, including two allegations of rape, which prompted an investigation by police.
The CBI’s staff has shrunk from almost 300 to less than 200 after a redundancy round sparked by members delaying or cancelling payment of their fees over the scandal. Aviva, KPMG, NatWest, John Lewis and Tesco were among dozens of large companies that publicly confirmed they had quit.
In an interview with the Financial Times, chief executive Rain Newton-Smith compared the struggles of the group, which says it represents 170,000 businesses and regularly meets senior politicians, with those of small enterprises.
“Like a lot of small businesses, we’ve had to do some of the really tough things, of resizing the shape of our organisation, but we’ve gone through that now,” she said. “We’ve come under a huge amount of scrutiny and I think we’ve been really open about our programme of change around people and culture.”
The lobby group has committed to reporting to members on the progress in overhauling its culture. “That feels very open and transparent to me for an organisation that’s less than 200 people,” said Newton-Smith.
Asked whether she was saying there had been disproportionate focus on the CBI following the scandal, she said: “In a way, yes. But in a way, it’s flattering.”
A career economist, Newton-Smith left the CBI for Barclays bank in March before unexpectedly returning one month later as boss of the group while it battled to remain the self-styled “voice of business”.
Her predecessor, Tony Danker, had been sacked over unrelated misconduct claims. He has said he was made the “fall guy” for wider organisational problems.
Despite the CBI’s reduced size and a boycott by ministers earlier this year, Newton-Smith said its clout was undiminished ahead of the Autumn Statement.
The group’s pre-Budget submissions to the government are usually closely read in Downing Street, said one former senior Whitehall official.
Chancellor Jeremy Hunt, who said in April that there was “no point engaging with the CBI when their own members have deserted them in droves”, is set to give the organisation a boost by appearing at its annual conference on Monday. Shadow business secretary Jonathan Reynolds is also expected to speak.
“I think we will absolutely be as influential this autumn . . . because we’ve been having detailed policy conversations,” said Newton-Smith, who met Hunt last month. “The access we have with government and with the opposition feels really normal.”
On Saturday Hunt indicated the government would be renormalising relations with the CBI ahead of giving his “autumn statement for growth” in the coming week.
“If we’re going to grow the economy, we’re going to listen to all bodies that represent businesses, whether it’s the CBI or Make UK or the FSB representing small businesses,” he said.
Newton-Smith has overseen the implementation of 34 recommendations by an external law firm that probed the group’s handling of the allegations, and an appearance by Hunt may help her efforts to woo companies to stay with or return to the CBI.
Executives at some large members that paused engagement or delayed paying their fees after the scandal told the FT they would probably renew their memberships when they fell due. They said this was partly because of the cost and difficulty of creating an equally effective cross-sector group with similar clout if the CBI were to collapse.
But decision makers at other companies, many of which have quit entirely, said the timing and choreography of publicly rejoining were difficult, in view of the reputational risks.
According to the CBI, about 1,100 companies and almost 150 trade associations are fee-paying members. Including the members of those trade associations, it says that it speaks for about 170,000 businesses, down from 190,000 before the scandal broke.
Newton-Smith, who has pledged to make the CBI more transparent, repeatedly declined to say how many direct members had quit. “We lost members during the crisis. But we’ve also gained some members back,” she said, adding that the “vast majority” had not left.
The loss of fee income left the CBI facing a cash crunch this autumn, which it resolved after securing support from some of the UK’s biggest banks. Newton-Smith said the group’s finances were “stable in the short, medium and long term” but declined to give details of the arrangements or say whether any members had pre-paid fees for future years.
Many member companies’ subscriptions are due for renewal in the new year, giving them only weeks to decide whether to stay. The CBI’s troubles have prompted some members to consider negotiating their annual fees — a six-figure sum for the largest employers. “You’ve got to make sure you’re getting decent value for money,” said a person at one company that quit.
Newton-Smith said the CBI’s fee structure was “confidential, like any business”.
The crisis at the organisation, which led it to suspend external events for four months, had made some companies question what they gained from their subscription, said the chief executive of one member.
Two CEOs who want the group to continue said they were uncertain whether it would survive. Its accounts for 2022 have yet to be published and are due to be presented at its delayed annual meeting later this year.
The group shelved merger talks with manufacturers’ umbrella body Make UK after securing financial support. It has not ruled out further talks but Newton-Smith said there was “nothing actively on the table”.
The CBI had no immediate plans to rebrand, she added, after telling the FT in April she was “sure” its name would change.
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