Labour's former business backers 'scared'

In 2005 Charles Dunstone, co-founder of Carphone Warehouse, was one of 63 business people who signed a letter supporting Labour: now he says he is "frightened" by the idea of the party winning the general election.

The business community feels "isolated" by Labour's shift to the left, he believes. "As a business person I'm frightened of an environment where there isn't sufficient emphasis put on growing the economy to grow tax receipts to spend more money," he says.

Mr Dunstone argues that New Labour under Tony Blair - and Gordon Brown - tried to end the "tyranny of the either/or": that you either have economic growth or fairness. "Now it feels like we have gone back to Old Labour and business people feel very detached from the party."

The Financial Times has spoken to several of those signatories from 2005 to gauge whether they have changed their view. Some loyal supporters have fallen by the wayside: Sir Ronald Cohen has withdrawn his backing, while Lord Sainsbury stopped donating after Ed Miliband beat his brother to the leadership.

Only a handful of new donors have picked up the slack, including former tax exile Andrew Rosenfeld and John Mills, a fierce eurosceptic.

Not all the backers from 2005 have lost faith in the party.

Sir Gulam Noon said he still supported Labour despite his reservations about the mansion tax.

"No party is perfect; I think the mansion tax is terrible. But sometimes you have to take the party line. My party is Labour, and I want it to win the election," said the curry magnate. "I know people are criticising Ed Miliband time and time again, but I have no doubt about his integrity."

Kevin McGrath, a senior figure in the property industry, said: "Some business people are very nervous about Labour and maybe positive about the Tories except when the conversation turns to Europe," says Mr McGrath, the chairman of M&M Asset Management.

"Many executives may not be elated about Labour being in power for five years, but they are more worried about the outcome if Britain leaves Europe".

Stefano Pessina, the head of Boots, said at the weekend that a British exit was the biggest political fear for his company. The Tories are promising a referendum which, if the polls are correct, could lead to Britain quitting the bloc. Labour has effectively ruled it out.

"People are not running around waving their arms, saying we want Labour in," says Mr McGrath. "Ed Balls has worked hard and Ed Miliband has not really, to be fair. But if you push them about what they really believe, the one thing they fear is leaving Europe - that is the biggest risk."

The 63 included Sir Chris Evans, the biotech entrepreneur who loaned money before the 2005 election.

This week he stopped short of a Conservative endorsement but commented: "It would be a disaster for the life sciences industry if an incoming government was anti-business. The industry depends on commitment to innovation and risk-taking and the UK needs to do a hell of a lot more of it."

Another signatory, Simon Woodroffe, founder of Yo! Sushi, said this week that Labour's approach "scares" him. Mr Woodroffe said the leadership did not understand the need for business to make "enormous profits" before discussing how to share them out via the tax system.

"What I worry about Ed Miliband is that he is appealing to the popular by saying 'look at these fat cats' making lots of money, it should be for the workers," he says.

Senior Labour figures have been sanguine about this week's row with business, having expected it for months. If anything, they are relieved that the first critic out of the blocks was a Monaco-based billionaire.

One businessman who signed the 2005 letter now believes the party needs to tack further to the left.

John Boyle, who sold travel firm Direct Holidays for £84m in 1998, and now has an investment business, wants Labour to promise a living wage and crack down harder on corporate tax abuse.

"Voters expect the Labour party to be coming out with crystal-clear policies on these things," he said.

"I believe in free enterprise, but the proceeds should be shared, not just gobbled up by the fortunate."

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