UK employers, already on edge over Labour, worry about May's 'tinkering'

By William Schomberg

LONDON (Reuters) - British business leaders reacted warily to Prime Minister Theresa May's plan for more government intervention in power and housing markets, and said big unanswered questions about Brexit would drag on the economy.

In an attempt to counter Britain's left-wing Labour Party, May's speech to her Conservative Party on Wednesday balanced emphasising the importance of free markets with a pledge to cap what she called "rip-off" energy prices.

The revival of the cap - which May appeared to have dropped after losing her parliamentary majority in a June election - was an unwelcome surprise for representatives of British employers, who are already disappointed by the government's lack of progress in Brexit talks.

"Today's announcement is an example of state intervention that misses the mark," Carolyn Fairbairn, CBI Director-General, said. "Market-wide price caps are not the best answer."

Shares in power providers such as Centrica and SSE fell sharply as May spoke.

The Institute of Directors, another employer group, said businesses were worried by the signs of more state involvement in the economy from the Conservatives, a week after resurgent Labour proposed bringing billions of pounds worth of private contracts under state control and higher taxes for companies.

In her speech on Wednesday, May said her government would spend an extra 2 billion pounds ($2.65 billion) to build cheaper houses for social housing.

"I think it's fair to say that this year's party conference season has been one big let-down for businesses across the UK," Stephen Martin, the IoD's director general, said.

"On the one hand you have a Labour Party which has decided that business is the bad guy, on the other you have a Conservative Party which talks about the importance of markets, but then tinkers around with Help-to-Buy (a housing programme) and energy price caps. What are business leaders meant to make of it all?"

Beyond the proposals for specific sectors, employers said they remained concerned that May was not moving fast enough to clear up the uncertainty about Britain's relationship with its main trading partners in the European Union after Brexit.

"It is vital for business that a comprehensive transition agreement is agreed before the end of the year," Terry Scuoler, the head of engineering industry body EEF, said.

"She must redouble her energies ... if she is to avoid significant boardroom decisions going against UK plc," he said.

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(Editing by Andrew Heavens)