By Jenny Gross and Nicholas Winning
LONDON--Business leaders from more than 100 companies released a
letter Wednesday backing the U.K.'s Conservative Party, marking a
significant escalation in the intervention from British business
ahead of a national election.
The letter, signed by senior representatives of corporate giants
such as BP PLC and Prudential PLC as well as from many smaller
companies, voiced support for Prime Minister David Cameron's
Conservatives' policy of lowering the corporate tax rate to 20%.
They also warned that a change in course for Britain's economy
would "put the recovery at risk," according to the letter,
published in the U.K.'s Telegraph newspaper.
Labour countered that corporate taxes would remain competitive
if it was in government and has said that a vote for the
Conservatives--who have pledged a referendum on whether the U.K.
should leave the EU--could augur the U.K.'s departure from the
world's largest trading bloc.
At stake when Britain goes to the polls May 7 are issues with
far-reaching implications, including the U.K.'s membership of the
European Union and management of one of the world's largest
economies.
But some in business say this election presents them with a
difficult choice.
Support for the center-right Conservatives could usher Britain
out of the European Union because Mr. Cameron has pledged--if he
wins the election-- to hold a referendum on whether the U.K. should
exit. But backing center-left Labour could lead to a series of
market interventions, as its leader has promised to introduce
measures such as freezing retail energy prices and forcing banks to
sell off branches to encourage more competition.
"Labour would be tough on business--and might be perceived as
lacking fiscal responsibility. A Conservatives-dominated cabinet
would pave the way for an unsettling referendum in 2017 on the
U.K.'s European Union membership," investment fund BlackRock Inc.
said in a paper issued this week on the election.
The release of Wednesday's letter comes two days after Labour
took out a full-page advertisement in another U.K. newspaper, the
Financial Times, warning "the biggest risk to British business is
the threat of an EU exit." The ad included quotes from a number of
business people--including those from Siemens U.K., BHP Billiton
and Nomura--echoing that sentiment.
The move backfired slightly after Siemens said the quote from
the head of its U.K. unit hadn't been intended for use in a
political campaign. Siemens said the comment by the executive was a
matter of public record and that "we are very supportive of Britain
remaining in a reformed EU" but that it wasn't made aware the quote
would be used for a "Labour Party campaign."
Aides of Labour leader Ed Miliband defended their use of the
comments, saying they were public statements made in the past by
the business leaders and nobody was challenging their accuracy.
A key battleground in the close-fought election is who can best
manage the U.K.'s economy, which is growing again after several
years of little or no growth in the wake of the recession. But
Britain continues to struggle with a large budget deficit and weak
productivity.
Data released this week showed the British economy grew at a
faster pace in 2014 than previously thought, at a revised 2.8%. But
the amount of output produced by British employees for every hour
of work fell 0.2% in the final quarter of last year. This means
labor productivity remains below where it was in 2007, before the
economic downturn.
Labour has struggled to convince voters it will put aside its
bigger-spending practices of the past and balance the budget while
delivering jobs. The Conservatives also accuse Labour of being
antibusiness for supporting measures such as increasing the top
income-tax rate to 50%.
Nick Robertson, CEO and founder of online fashion retailer Asos
PLC, said Wednesday on a conference call that he supports the
Conservative-led government's reduction of corporate taxes. He said
it encourages companies like Asos, which has the "lion's share" of
its sales outside the U.K., "to remain in the U.K. despite our
global footprint."
Labour leader Mr. Miliband rejects the antibusiness label and
argues that Mr. Cameron's promise to hold a referendum on whether
the U.K. should leave the EU is destabilizing for industry and is
the "biggest risk to British investment and jobs in this
decade."
Businesses in Britain often complain about regulations that
emanate from Brussels, but many say they would fear losing
unfettered access to the world's biggest economic grouping if it
left the EU. Virgin boss Richard Branson has warned that leaving
the EU would do enormous damage to entrepreneurs throughout the
U.K.
Martin Sorrell, chief executive of U.K. advertising group WPP
PLC, said this election presents business with a "difficult
choice." In an interview with British Broadcasting Corporation on
Wednesday, he said the uncertainty an EU referendum would generate
would discourage businesses from taking risks and investing. And,
if the U.K. did vote to leave the EU, it would have "negative
effects on the growth of the economy," he said.
But not all business leaders advocate remaining in the EU.
Simon Wolfson, chief executive of U.K. retailer Next PLC, said
he favors leaving the EU because it would liberate the U.K. from
debilitating EU regulation and increase trade opportunities with
the rest of the world. In a speech last month, however, he noted
that leaving the bloc also would come with big risks. People could
interpret the U.K. leaving the EU as the country taking an
opportunity to build national walls rather than tear them down, he
said.
--Simon Zekaria, Jana Simmons and Christopher Alessi contributed
to this article.
Write to Jenny Gross at jenny.gross@wsj.com and Nicholas Winning
at nick.winning@wsj.com
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