At the National Business Awards this week, the Chancellor Alistair Darling said that although the UK’s financial services industry is vital to the nation’s prosperity, employing 1 million people, we need to manufacture and export more in order to lay firm foundations for future growth. That sentiment has since been echoed by Gordon Brown.
Evan Davis, the BBC journalist who fronts Dragons’ Den, also spoke at the Awards. He suggested the nation needs to perform a ‘three-step dance’ in order to emerge from the current slump. First, households must save more, returning to pre-war prudence in the face of shrinking pension provision. Second, the government should save more, i.e. borrow less. And thirdly, we need to export more.
While none of the three steps is easy, the one that will really get policymakers’ legs in a tangle is the third. Householders can be forced to save more, spending can be cut and taxes raised (though the short-term pain may be acute). But to export more, to serve fewer pizzas and make more widgets, requires not just a few policy changes but a rethink of our approach in areas from education and research to business support and the labour market.
It means reversing decades of decline in the UK’s manufacturing industries, enticing bright students to go into science and engineering, not accountancy, banking and law, and addressing the continued reluctance of many British businesses to consider exporting compared to our European neighbours. We may be helped by a weaker pound (thanks to all the government borrowing) but with competitors like China growing in strength and technical capability, that’s hardly a sufficient foundation for a new economic order.
The good news is that some of the tools we need are already in place. UK Trade and Investment, by and large, does a good job of helping businesses realise their international ambitions (including, ironically, helping them visit the US to raise funding). The Technology Strategy Board invested in 130 science and technology companies last year, putting them in touch with research institutions to spark new opportunities. But this useful body receives just £150 million annually, peanuts compared to the scale of the bank bail-outs or the cost of propping up old industries such as car manufacturing.
Bold steps are needed to make a real difference. Alistair Darling joked last night that he received a text from his daughter after the last Budget that read, ‘Hey Dad, is it true you’ve wrecked the economy?’
That might be an overly harsh assessment – but this government still has a chance, in next year’s Budget, to accelerate the efforts it has made in the right direction and extend its support for companies that are still ‘making things’ in the UK. The task might be hard, but look at the way Japan and Germany rebuilt themselves as top exporting nations after the war, or how China has gone from Maoism to manufacturing solar panels. Prospects can’t have looked much better for those countries at their nadir than they do now in the UK. Our decline as a manufacturing nation is not irreversible.
