The reception for Jeremy Corbyn as he left the stage, after telling the packed conference hall of his plan to nationalise vast tracts of the economy and crack down on tax avoidance, spoke volumes. Yet this wasn’t a Glastonbury-style gathering of Labour supporting millennials; Corbyn drew this warm applause at the CBI annual conference, from a room full of business leaders last week. They included some whose industries could be taken into public control under a Labour government.

Perhaps, rather than his policies, it was the Labour leader’s smattering of jokes and his quick-fire remarks at the business lobby group’s gathering this week that helped the audience warm to him. Or it could have been that the audience is gearing up for a change in government, as the Conservatives’ grasp on power appears to grow more tenuous by the day.

Either way, this friendly reception was in sharp contrast to the polite yet flat applause offered to Theresa May earlier that morning. The prime minister stalled during her question and answer session – stumped by a question on priorities for the science industry – and made flat-footed responses to questions about tax evasion.

Behind the scenes, the private sector is paying serious attention to Corbyn. Businesses now regularly ask their accountants and lawyers, and the leaders of local business lobby groups, what a Corbyn-led government would mean for them.

If they don’t exactly expect an imminent Labour landslide, they certainly think that a Corbyn administration has entered the realms of the possible. The shadow cabinet, which until the election in June was a hotbed of intrigue and a fount of embarrassing stories, is now talked about as a stable outfit and the basis for a government in waiting.

Above all, Corbyn stands as a potential ally to business in securing access to the European Union’s single market at a time when the government appears unable to make any progress. Speaking at the conference – held on the banks of the Thames opposite Canary Wharf, home to several financial sector firms that could leave in the event of a hard Brexit – he said Labour had “common ground” with business.

He rounded off his speech in language heard more often on the election trail than in a hall full of suits. “I value the day-to-day relationship we have with the CBI, as does John McDonnell, and others in my team,” he said. “And I look forward to working with all of you in the future, whenever the general election comes, and we, I hope, are in government, to continue working with you.”

That claim of a day-to-day relationship is no exaggeration. There is a revolving door in Labour’s gleaming Westminster offices, with one business representative leaving as another enters.

McDonnell, in his role as shadow chancellor, is the main focus of attention. From a rocky start that saw him first convene and then disband a collection of sympathetic, yet unruly economic advisers, he has grown in confidence to a point where he regularly welcomes the business lobby’s top brass with a cheery “How do you feel about a Marxist chancellor, then?”

On infrastructure, his ideas chime with those of major lobby groups including the CBI, the British Chambers of Commerce, the Institute of Directors and the Federation of Small Businesses. His pledge for a faster digital backbone to match South Korea’s hi-tech economy has also met with approval. Meanwhile, businesses are having to wait until the day before the budget on 22 November to learn about the government’s industrial strategy.

McDonnell and his shadow business secretary, Rebecca Long-Bailey, plan to take advantage of historically low interest rates to borrow £250bn for infrastructure spending over 10 years as part of a national transformation fund.

They will also set up a national education service that will allow people to retrain throughout their lives. And Labour wants to raise public research and development spending to 1.85% of GDP, investing an additional £1.3bn during its first two years in office. By 2030, McDonnell says total R&D spending would amount to 3% of GDP, double the current average.

As one business leader said: “These are great aims. But how will they be paid for? However much we all want to achieve them, British business is not a bottomless pit of funds.”

For decades, polling by the CBI has found that cuts to corporation tax have figured low down in the list of business priorities. But that’s not to say that its members support a rise.

McDonnell’s speeches, and those of close colleagues, have tended to distinguish between large businesses and small when it comes to the question of tax. Large businesses are considered monopolistic, prone to tax dodging and caught up in the global race to the bottom when it comes to wages and workers’ rights. Small businesses on the other hand are the bedrock of the economy: innovative employers of local labour, who get pushed around by the major firms in their sector.

This is why McDonnell plans to exempt small businesses from increases in corporation tax and why he pays more attention to their complaints about business rates. Small business leaders also favour Labour’s plans for skills training and a national education service, aimed at tackling their lack of resources to train the next generation of skilled workers.

But the divide rankles with larger businesses, who would rather McDonnell focused on “the few bad apples” and not lump the vast bulk of civically minded businesses in with them.

As one senior lobbyist said: “The sense inside Labour that small business deserves special favours goes back to the Gordon Brown days. So it’s not new. But it is still wrong.”

Nationalisation is another sticking point, though many in the business world are prepared to take a more pragmatic approach, especially when Labour’s target list includes several foreign-owned utilities.

Can the public sector do a better job than privately run monopolies? Most business leaders say they can’t. But as one said: “If Labour is prepared to tell us what it is about the current situation it really doesn’t like, we might be able to find another way to achieve a situation that has a longer life expectancy. Is it lack of investment, foreign ownership, or owners running things in their own interests? If we can prioritise, then a model other than nationalisation could be appropriate.”

During Labour’s recent conference in Brighton, the CBI made it clear that it found McDonnell’s speech about nationalisation and bringing PFI contracts under government control alarming. Director general Carolyn Fairbairn said: “The shadow chancellor’s vision of massive state intervention is the wrong plan at the wrong time.”

After Fairbairn’s comments were published, McDonnell appeared to bear her no ill will. He was his usual cheerful self and told CBI staff he was keen to continue developing Labour’s ideas based on a robust discussion with business. With May’s government wobbling more each day, it is a gauntlet that business is only too keen to pick up.

Carolyn Fairbairn, the director general of the CBI, has criticised some of John McDonnell’s policy statements. Photograph: Paul Hackett/Reuters

Labour proposals that businesses like

Sector councils

Sector councils for each strategic industry – modelled on the car industry’s Automotive Council UK – will bring together government, employers, workers and trade unions as part of “a new era of economic cooperation”, says Labour. One business leader said long-term planning was essential, “but will Labour want everyone to agree that its policies are the best for each sector or be prepared to compromise?” Concerns about how the councils will fit with the Tories’ Local Enterprise Partnerships need to be resolved.

Skills and lifetime education

Labour plans to introduce free, lifelong education in further education colleges for anyone to retrain at any point in life. This move is supported by most of the main business lobby groups – though, as with everything, the concern is often not about the aim, but how it will be introduced. Some are nervous about the quality of training when the commitment is to double the number of completed apprenticeships at level three from 94,000 in 2015-16 to 200,000 by 2022​, the end of the parliament​.

Energy policy

Nationalisation is a Labour buzzword that the business community would like to put back in the box marked “1970s”. But it is more sanguine about the party’s policy to “take strategic control of distribution and transmission networks to ensure faster incorporation of renewable energy, and make the investments and adjustments needed to transition to a low-carbon economy”. This is partly because the networks are largely foreign-owned, but also because they are resistant to change.

Proposals that businesses don’t like



Higher income taxes and spending

Many business leaders worry that the tax burden is already historically high as a proportion of GDP, and borrowing too. The plan to spend between £8bn and £10bn on abolishing university tuition fees and boosting the budgets of schools, FE colleges and much of the NHS will add to the national debt. Labour will claw back some of the funds in extra tax on people earning more than £80,000 a year, catching most senior businesspeople.

Corporation tax

Labour has split the business lobby with its proposal for a lower rate for small companies. The move, along with plans to support small businesses in their pursuit of unpaid debts by bigger​ business​ clients, has cheered the Federation of Small Businesses. Scrapping Tory plans to reduce the main rate from 19% to 17% barely causes a ripple of protest, but pushing it back up toward 26% has met resistance from large employers.

Sequestrating business assets

There was an outcry when shadow chancellor John McDonnell appeared to say he would buy the UK out of longstanding private finance initiative deals covering schools and hospitals for a fraction of their value. This was seen as setting a precedent for governments simply paying what they liked for business assets. McDonnell has appeared to pull back, but it could be a hint of the more radical socialist agenda that business leaders fear.