If the CBI had been aiming to rehabilitate its battered reputation after weeks of damaging headlines, then Friday morning’s news of a second rape allegation sent the employers’ organisation into a tailspin.

Within three hours of The Guardian publishing a graphic account of the alleged rape of a woman while she was working for the CBI at one of its international offices, the first big corporate name — FTSE 100 insurer Aviva — announced it was quitting the organisation.

There have now been allegations of rape concerning two women who worked at the CBI and, over the course of Friday, a steady stream of companies from numerous industries announced they were either ending their membership of the organisation or suspending all dealings with it.

The CBI, founded in 1965, constituted by royal charter and Britain’s leading business lobby group, finds itself in a perilous position after claims that suggested a toxic workplace culture.

“The dominoes are starting to fall,” said one board member of a leading retail bank. A senior executive at one of the FTSE’s largest 20 companies that stopped paying its fees to the CBI said the organisation now needed a “fundamental rethink”.

Ann Francke, chief executive of the Chartered Management Institute, a professional body that encourages better management practices, said the CBI was facing an “absolutely existential crisis” because of the pattern of allegations.

The CBI had earmarked early next week for a drive to restore confidence in the organisation by publishing an investigation commissioned from law firm Fox Williams into allegations of sexual misconduct, workplace bullying and drug-taking made by more than a dozen women.

Three CBI staff members have been suspended pending the outcome of the probe, with Tony Danker already sacked this month as the organisation’s director-general over unrelated and lesser complaints of misconduct.

In a statement responding to The Guardian article, CBI president Brian McBride said the organisation’s board planned to communicate the “steps we are taking to bring about the wider change” as part of a “root and branch” review of workplace culture at the lobby group.

But many CBI member companies that last week pledged to “wait and see” how the organisation responded to the Fox Williams report on Friday have voted with their feet and announced they are cutting ties, including BMW, John Lewis and Virgin Media O2.

Suffolk-based brewer Adnams, which has about 600 employees, said the latest rape allegation had made their membership untenable. “It’s impossible for us as a company with a lot of female employees and an ethical position to justify remaining a member,” said chief executive Andy Wood.

Many large businesses said there was still a need for a cross-sectoral body to lobby the government on behalf of corporate Britain, but the CBI — which has been frozen out by ministers since the revelations first broke before Easter — no longer had the authority needed for the role.

“That organisation needs to be a trusted voice and have the membership necessary to be representative,” said accounting firm PwC, which has suspended all dealings with the CBI. “With multiple horrific allegations hanging over its head, the CBI is currently unable to do its job.”

As the list of companies either quitting the CBI or halting activity with it grew steadily, the CBI declined to comment. Its board convened to discuss the Fox Williams report.

The CBI’s promised culture change is due to be overseen by Rain Newton-Smith, its former chief economist who has been appointed to succeed Danker as director-general.

Whether the CBI will still exist by the time she takes control is far from clear. Two people familiar with the matter said questions were already being raised over whether, given the haemorrhaging of member companies, the CBI would have sufficient cash reserves to meet its £1.25mn monthly wage bill.

The organisation, which has approximately 300 staff, relies on membership fees for the bulk of its annual income of about £25mn. At the end of 2021 the CBI had £9.4mn of cash and short-term deposits on hand, according to its latest available accounts — a level broadly consistent with previous years.

McBride told the Financial Times last week that the CBI had “prudent reserves” and was “well covered” financially in the short term but that it would be a concern within 12 to 18 months if the organisation lost a significant portion of its subscription revenue.

The departure of some of the CBI’s large member businesses — which pay proportionally higher subscription fees — will be a significant blow to the CBI’s finances. While smaller businesses can pay less than £1,000 a year for membership, bigger companies can have annual subscriptions in excess of £100,000.

By Friday afternoon, conversation among businesses as well as in Whitehall was starting to turn to what might replace the CBI.

One government insider said “the market will decide” the fate of the CBI, adding the organisation might in theory save itself if it could reform quickly. “There are going to have to be some pretty significant reforms but at the moment it looks pretty terminal,” added the insider.

This view was echoed among CBI member companies and others. One senior UK manufacturing executive said something would have to replace the CBI if it was felled by the current crisis.

“If business advice to government is now from the ‘B4’ of Make UK, the British Chambers of Commerce, the Federation of Small Businesses and — God help us — the Institute of Directors, then Boris [Johnson’s] ‘fuck business’ wasn’t a statement but a prophecy,” he added. “There is still a need for a business organisation, just one that’s fit for purpose.” 

On Friday evening following a three-hour meeting the CBI board issued a statement saying the organisation shared the “shock and revulsion at the events that have taken place in our organisation . . . We are deeply sorry and express our profound regret to the women who have endured these horrific experiences.”

It added it had decided to suspend all policy and membership activity until an extraordinary general meeting in June.

“At the EGM we will put forward proposals for a refocused CBI to our membership for them to decide on the future role and purpose of the organisation,” said the CBI board.

But the head of a trade body that is a CBI member was unconvinced that the move would be enough to save the organisation. “It’s too little too late,” she added. “The dialogue has already moved on to what comes next, without the CBI.”

Additional reporting by George Parker, Judith Evans, Michael O’Dwyer, Anna Gross, Josephine Cumbo, Emma Dunkley, Kate Beioley, Daniel Thomas, Laura Onita, Hannah Kuchler, Owen Walker, Peggy Hollinger and Peter Campbell

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