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The King’s Speech: A Strategic Analysis of the King's Speech and Its Impact on Business
15 Nov 2023
What is the King’s Speech?
The State Opening of Parliament is a ceremony marking the beginning of a new Parliamentary session. The ceremony is typically held annually, though Parliament’s previous session lasted over a year, having been opened in May 2022. The ceremony concludes with a speech written by the government and delivered by the Monarch, the King’s Speech, in which the government’s legislative priorities over the next Parliamentary session are set out.
Particularly close attention was paid to this year’s ceremony, Charles III’s first as King, as it opened the final session of Parliament before the next General Election. Typically, speeches are written to be sufficiently vague that the Government is not overly bound to or constrained by them. However, with a contentious General Election just around the corner, it was vital to establish a legislative agenda, at least ensuring Parliament and the electorate are aware of the priorities and policy direction the Government would seek in what could be its final Parliamentary session.
- Inflation and Fiscal Policy: The King’s Speech began with further commitment for the Government to play an active role in controlling inflation. Rather than taking full responsibility, as Sunak has appeared to do previously, the speech set out plans to manage ‘responsible’ spending and borrowing to help the Bank of England reach its 2% annual target.
- Offshore Petroleum Licensing Bill: One of the key themes of the speech was energy security. Referencing recent supply shocks such as the war in Ukraine, the speech announced the Government’s intent to increase domestic energy production by expanding extraction licences for new oil and gas fields in UK waters. Additionally, the speech stated the Government’s intention to attract “record levels” of investment in the UK’s renewable energy industry, and reaffirmed commitments to the 2050 Net Zero target.
- Automated Vehicles Bill: The speech also introduced plans for new legal frameworks to support emerging industries, with self-driving cars and machine learning technology mentioned as examples of where new legal frameworks could support innovation and investment. The bills will make adoption of technologies easier, for example, the Automated Vehicles Bill will make the UK one of the first nations to allow automated cars to drive on public roads without a human operator.
- Criminal Justice Bill: Elsewhere, new and existing bills will be debated to expand police powers, introduce tougher sentences for some extreme crimes, and force defendants to appear in the dock for sentencing.
- Tobacco and Vapes Bill: Rishi Sunak’s flagship Party Conference policy, to phase out cigarette consumption completely, will also be put to Parliament this session.
What does it mean for business?
Despite inflation control being the mandate of the Bank of England, Prime Minister Sunak has repeatedly made promises to halve inflation by the end of the year. The King’s Speech was not quite so bold, but it did commit to spending and borrowing responsibly to ease inflation.
Businesses may take this as a sign not to expect tax increases in the next Parliamentary session. The primary inflationary pressure in the UK is currently cost-push, meaning the Government’s fiscal plans will have to be very careful not to increase taxation costs to businesses, which would then be reflected in higher prices. One exception could be hypothecated taxes on energy giants, as both Government and opposition have expressed interest in targeting record profits made from the supply constraints of the war in Ukraine. Responsible fiscal policy, if successful, will also ease the cost of living crisis for consumers, potentially seeing consumer demand begin to normalise.
The economy was a large focus of the speech as the government tries to kickstart economic growth. Volatile energy prices are a particular risk for businesses. In April of this year, Ofgem wrote an open letter to the Prime Minister detailing that over a million SMEs faced energy bills “higher than is explained by market conditions” having been forced to renew long-term fixed contracts when energy prices were peaking. But beyond this, all SMEs are vulnerable to sudden fluctuations in energy prices. Businesses will therefore pay close attention to policy designed to stabilise and reduce prices, such as new oil and gas licences.
To extract this oil, typically years of research and exploration is first necessary, making businesses wary of the immediate impact such a policy could have. Primarily, if Sunak loses the next election, Labour leader Keir Starmer has stated that he would honour existing licences but issue no new ones. As such, the announcement may in fact be reversed before enough licences have been issued to have any meaningful impact on UK domestic energy production and therefore businesses’ energy costs. Moreover, the partisan divide between the Government’s position and that of the opposition will create uncertainty for oil and gas companies who want assurances that investment in research now would not be undone by a Labour government.
Another potential stumbling block for this announcement may be the reaffirmation of the Net Zero 2050 target. Even if future Parliaments continue the policy of issuing new oil and gas licences, significant increases in oil and gas extraction will rapidly become incompatible with the UK’s emissions obligations.
Commitments to greater investment in renewable energy may give businesses higher confidence. For the many businesses working directly on renewable energy production, policy to secure greater investment will undoubtedly provide new opportunities. Given Sunak’s commitment to ‘responsible’ spending, it is likely that the Government will only look to improve policy conditions for private investment, rather than provide substantial new direct investment. However, policy emulating successful schemes such as the Contract for Differences to make private investment more attractive could increase the UK’s domestic energy supply substantially.
For businesses in emerging markets, new policy frameworks to support innovation and investment, provided they are adroit, will provide growth opportunities. In formulating anticipatory policy for emerging technologies, the UK will hope to be seen as prepared to be at the forefront of them, potentially also providing opportunities for businesses to work with multinational corporations who see the UK as an attractive market.
The Automated Vehicles Bill will have profound consequences for businesses in the gig economy. Companies such as Uber and Deliveroo will have the opportunity to replace labour with capital in the form of self-driving cars. The bill may also influence employment law, as plans from the Opposition to treat gig-economy workers as employees may serve to speed up the rate at which self driving cars are adopted to replace labour.
Businesses may also pay attention to the Tobacco and Vapes Bill as a signal that Rishi Sunak’s party is willing to make policy that does not align with traditional conservative ideology. Sunak has demonstrated that dissent from the more libertarian wings of his party will not dissuade him from taking an interventionist approach to matters he sees as delivering negative social impact. Despite the obvious risks that an interventionist Government could pose to business, it also presents opportunities for ESG oriented companies to champion positive social impact policies that may previously not have aligned with Government ideology.
What happens next?
While announcements were made, this year’s King’s Speech was most notable for its lack of substantial policy. Going forward, this lack of ambition from the government may create a legislative void. Unmanaged, this could lead to businesses unprotected by legislation. As such, businesses will need to take a proactive approach to identifying new policies that align with the interest of the major Westminster parties, and prepare to champion them.
For ESG oriented businesses, the broad strokes policy painted in the King’s Speech provides an opportunity to raise policy incentives that work for everyone. For example, ESG focussed businesses in renewable energy have been given space to promulgate incentives that benefit both themselves and society to encourage investment in renewables.
With Parliament open, the announcements made in the King’s Speech will begin to make their way through the legislative process. The bills headed to Parliament will have direct impacts on businesses across all areas of the economy. The King’s Speech demonstrated the opportunities legislation can provide, with regulatory frameworks to support new industries, investment in renewable energy, and licences for oil and gas. However, as the tobacco industry will attest, there are also risks that new legislation could restrict businesses.
For businesses and Parliament alike, consultation is paramount. Businesses who want legislation to work for them should prepare to respond to consultations and work with lawmakers to represent their interests.
If you would like to benefit from political intelligence services that would allow you to be heard in the new Parliamentary session, reach out to Polis Analysis through our email at email@example.com.
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