We navel gaze too much as a country. It is true we face significant economic challenges. But what is invariably left out from our debate is that almost every other developed country does too. And that we are doing much better than most of them.
Last week I attended a meeting in San Francisco of the CPTPP trade bloc we joined earlier this year. In attendance were our 11 fellow signatories, Indo-Pacific countries from Canada to Japan to Australia. Every representative was concerned about the possibility of a global slowdown next year, and with how their country could escape the low growth rut the developed world seems trapped in.
So yes, we need stronger productivity growth. But we must not catastrophise. Our economy has grown the third fastest since of all G7 countries since 2010. We have recovered more strongly from Covid than France, Germany, and much of Europe. We are far from alone in facing the economic challenges we do.
Recognising this is important for two reasons. First, because melodrama does not make for good policy. Whereas an honest appraisal of the facts does. And second, because there’s much we can learn from how similar countries are attempting to tackle the challenge of low growth – both regarding what to do and what not to do.
As the Prime Minister and Chancellor set out earlier this week, the approach we are taking is built on our conviction that businesses drive economic growth, not government.
Our job is not to hike taxes and borrowing in a doomed effort to ‘force’ businesses to succeed by picking a few ‘winners’, but to create the conditions in which businesses can succeed. Because we know if we do this, the risk-takers, entrepreneurs, and innovators in the private sector will do the rest.
As the Secretary for Business and Trade, I therefore view my job not as picking which businesses or sectors I like or dislike. But driving growth by rooting out whatever Whitehall or any part of the state is doing that is holding back the risk-takers who create the wealth, jobs, and tax revenue on which our society and country depends.
I believe we have most to learn from countries successfully executing a similar approach. Many business leaders tell me they’d much rather reliably cheap energy than a subsidy. It was a privilege this week, therefore, to launch trade talks with South Korea, the Western country that has built safe nuclear power plants at a much lower cost than any other, and meet those behind this work.
But, again, we must not ignore the supply side progress we ourselves are making. As the Chancellor’s Budget this week made clear, across housing, energy, taxation, regulation, welfare, skills, trade, and public services, this Government is enacting reforms that will make it easier business to thrive and succeed.
Another such area is manufacturing. A sector that in every Western country obviously faces fierce global competition.
Such competition makes it all the more impressive that British manufacturing has been an unambiguous success story over the last decade and a half. Between 2007 and 2021, productivity growth of technology driven manufacturing in the UK grew more than in any other G7 country. This year, we overtook France as the world’s 8th largest manufacturing nation. Facts too often ignored in our doom-laden discourse sadly still too infected by Brexit Derangement Syndrome.
We did not achieve our manufacturing success by hosing a few government-favoured parts of the sector with £28 billion in subsidies, as Keir Starmer has said he will do. Subsidies that other businesses and all taxpayers would ultimately, as always, foot the bill for.
It was achieved by us playing to our strengths; specialising in high value-add areas, often particularly scientific or technological in nature.
And that insight is what the Advanced Manufacturing Plan I am publishing today is based on. Our £4.5 billion of investment, announced by the Chancellor earlier this week, will be targeted in areas where we have a verifiable competitive advantage. And where the private sector return on every one pound of state investment is not two or three pounds, but five, six, or seven.
I know from my meetings with Chairman and CEOs of our big and small manufacturing companies that they agree this approach is best for British manufacturing as a whole.
And this approach is already working. It is what secured Tata’s £4 billion investment in a gigafactory in Somerset, creating 4,000 new jobs. Boeing’s £80 million investment in aerospace manufacturing in Sheffield, creating 3,000 new jobs. And, most recently, Nissan’s £2 billion investment to mass produce their new electric car models in Sunderland – securing thousands of great jobs for the future.
Secure supply chains are also at the heart of the Advanced Manufacturing Plan. Prosperity built on sand is not prosperity at all. Whether it is batteries, critical minerals or essential components of finished goods, our plan will work to safeguard the affordable supply of materials critical to the success of UK manufacturing.
In globally trying economic times, the siren call of old ideas debunked by history can suddenly become alluring if they ascertain a fresh new spin. One such idea is that the answer to the West’s productivity challenge is the return to higher taxes and borrowing to fund mass state subsidies to certain firms deemed ‘winners’ by bureaucrats.
The Labour Party have fell for the modern spin that ‘this time it’ll be different because … something something China… something something Net Zero.’ But it won’t be. China and climate change pose very real challenges, which require good strategies to tackle. But if
Labour win the next election, make no mistake, we will waste tens and tens of billions in the late 2020s just as we did in the 1960s and 1970s.
The Conservative approach of backing risk-takers and entrepreneurs to create and enable a wealthier society for all by surgically tackling what’s holding them back is the right one now just as it was in 1980s. If this Government continues to execute its plan, we should be confident Britain’s economy will thrive just as it did then.
This is a lengthened version of an article first published in The Times, 26 November 2023
