Vision for Britain amidst the crisis

As I outlined last week in blog 1, it may seem bizarre timing to create a Vision for Britain in the midst of Lockdown 2 as the excitement for a vaccine builds and UK unemployment rises above 1.5million people.  However, this is exactly the right time to build the coalition of the willing and rally Government and business around a coherent strategy and vision for Britain. I am simply calling for a ‘Build Back Better’ Strategy to shape Britain’s prosperous future. The ideas here are not revolutionary. Instead, they represent pragmatic thinking – in short, common sense - about where the Government can quickly lend its support to encourage growth across key sectors for the UK economy and in ways which will drive collective benefit for all UK citizens. The clarity of data-driven analysis to be at the core of the Industrial Strategy led by BEIS. In this blog, I will pick just a sample of industries where the UK could build strong domestic supply and drive an export-led growth recovery. The outline below is not exhaustive but captures some of the lessons from Covid-19 and looks forward to a life outside the Customs Union.

Currently the UK economy is 70% Services. There are predictions that Creative, Digital, Tech industries will grow to 50% of the UK economy by 2030. Prior to Covid-19, the Technology industry was growing 6x faster than the rest of the economy and Technology has only accelerated with the Digital acceleration witnessed in ‘lockdown’. Already, there are many good Government interventions here – with supportive tax treatment for Digital companies making the UK the best country to grow a Tech business (confirmed by OECD). In a world when the UK has left the EU, there is a real opportunity for UK to be the clear No 1 (after USA & China) for Tech and Digital industries. We cannot be ‘all things to all people’ across the whole of Tech but rather focus on where UK has strong competitive advantage. The UK should focus on clusters where we have clear leadership – Fintech (where UK is No 1), HealthTech, LawTech (40% of the world’s laws based on UK), Edutech, NetZero, AI and Cyber. In addition, there can be new multi-billion segments where the UK can mobilise to create competitive advantage – as an example, the ‘Internet of Freight’ with the forthcoming departure from the Customs Union, there is potential for a Tech cluster to build the end-to-end frictionless trading economy. Conditions should extend to more ‘joining up’ of Government, industry and UK software companies - aligning better skills through Education/FE sector with Creative/Digital industry needs – Apprenticeships/Interns; Investment in Regions; Science and innovation investment; and accelerated Diversity & Inclusion. The Private Sector and Investment community would value the Government ‘aircover’ and deploy their firepower and capital. With fully flexible working seen in lockdown, the UK strategy should shift the emphasis towards the regions to allow companies to grow their regionally based workforce, creating jobs in the areas likely to be most impacted with the current recession. NetZero can underpin the Creative, Tech and Digital Industries strategies on two levels – firstly to build a NetZero tech cluster capability in what is predicted to be a trillion dollar market and also to harness NetZero innovation throughout all aspects of life, as an example, the Workplace of the Future vision with a massive reduction in fossil fuels and transportation.  In my role as chair of Tech Nation I am excited that Tech (with Creative Industries) could be 50% of the economy by 2030 placing a responsibility on the sector to ensure tech as a force for good. Given the US Congressional Report into Big Tech and there is an inevitability that we are moving towards a regulatory environment where big tech comes into the spotlight for regulators. The UK ‘Build Back Better’ strategy will acknowledge that big tech has sometimes abused its market position and taken full advantage of international tax optimisation and the UK ‘bricks & mortar’ tax system. An industrial strategy with tech at its heart has worker and citizen responsibilities as important outcomes. Any economic strategy must have a social licence as well as an intellectual licence. In tangible terms this is about explaining how tech-enabled industries are creating jobs and democratising market power – not simply creating monopolies that hoover up consumer surplus.  The UK Government can lead the world to embed a sensible forward-looking regulatory structure which is the essence of Tech4Good. With my role at Tech Nation, you can count on us to support this charge.

Turning to Manufacturing, it is tragic that the UK was so dependent on imports for PPE and ventilators at the start of the pandemic. There are some core products and services where the UK needs a strong domestic production capability at the centre of the multiplier effect. This is common sense and a lesson from the pandemic. Manufacturing is estimated to be around 10% of the UK economy but estimated to be 40% of exports. The UK has competitive advantage in advanced manufacturing and the manufacturing industry should be strategic for the UK to drive an Export led recovery and growth. Again, the Government could play a key role in signalling a Manufacturing renaissance and switch a big slice of the UK ￡280bn annual public sector procurement to ‘pump-prime’ demand post exiting the Customs Union without the constraints of state aid and EU procurement law. With the UK investment in advanced manufacturing, innovation on Greentech and renewables could play a significant role. As an example, with the PM announcement on UK becoming 100% renewables for domestic power, it seems to make little strategic sense to invest more in new nuclear. The cost of nuclear power is 3x onshore wind or solar and nuclear still has a nightmare decommissioning cost and risk to the environment - a millstone for future generations. Furthermore, nuclear is an industry where the French dominate with companies like EDF so why would we choose to bet where the UK is permanently dependent on another nation, a net importer and at a higher cost? The same logic applies to hydrogen power where the Japanese are light years ahead of the UK. However, the UK could become a world’s leader in wind energy with strong domestic demand to create the platform for exporter of wind renewable equipment, turbines, goods, technology, products and knowhow. Currently the UK has the 6th highest wind capacity However, my understanding is that currently there is NO large scale wind turbines that are 100% British manufactured although there is some fantastic innovation from companies like https://www.britwind.co.uk/. Today over 20% of UK energy comes from wind. For the Government, it is not about picking winners, but rather looking at comparative advantage and doubling down on energy sources where the UK can lead the world with domestic demand fuelling an export drive and potentially worldwide market leadership. One argument often presented against this is that the UK needs nuclear to manage domestic surges – again, smart technologies, AI, smart meters, and smart technology solutions to manage consumption can provide a much more strategic response. I am certainly not jingoistic - in fact, I am the opposite. I love France, Japan and other countries but also, I want to serve the best interests of Britain. We need to rediscover the sense of pride with “Made in Britain”. Buying British products means more British jobs and giving young people a purpose and future. Government plays a massive role in working with industry to make smart decisions for resilience of energy supply with public/private partnerships and incentives to win in multi-billion markets. This is just one example to apply to selective areas of Advanced Manufacturing – lets be proud of ‘Made in Britain’ and put the plan in place to make it a reality. At the centre of the industrial success should be great British companies employing British workers and paying British taxes and exporting British goods and services.

Likewise, with agriculture, it was crazy to see panic buying back in the Spring and core food staples in scarce supply. The Government should promote a clear plan for Agriculture and food production in the context of UK demand and export opportunities. Agriculture represents only 1% of the UK economy and yet is highly strategic for food supply to alleviate panic buying of stable groceries. Currently, the UK produces 50% of its food consumption. Government could work with the agriculture and retail industries to achieve an 80-90% self-sufficiency target within 5 years.  Farmers and retailers would celebrate the ‘Buy British’ shift, with a massive plus for climate change with a reduction of ‘food miles’; greater resilience in future pandemics; raised food standards; and a boost to rural communities and jobs. A further benefit is that the strategy would spawn the ‘ecosystem’ effect and unleash an AgriTech boom for Digital companies modernising food production through AI with sustainable farming and better land use. Again, agriculture could accelerate NetZero commitments with more sustainable agriculture driving higher food standards – vital for exporting the highest quality food products.

Lastly, the Prime Minister has been extolling the virtues of ‘Build Build Build’. The construction industry is vitally important (representing 6% of the UK economy) and there should be a shift towards supporting remote working and regional regeneration. Additionally, the Government proved in ‘lockdown’ that homelessness can be eradicated. However, homelessness is rapidly rising as unemployment bites. In a civilised society, the Government could mandate that a ‘roof over everyone’s head’ is a basic human right and extend the emergency measures to rehome those people sleeping rough. Construction can embed sustainability, energy efficiency and ‘smart home’ technology within the regulation framework.

This is not a definitive Industrial Strategy. However, the UK Government through BEIS has the opportunity to create a Plan for Prosperity; strong Regions; an Export-led recovery; higher value jobs and sustainability to achieve NetZero quicker than 2050. In the next blog I will look more longer term and explore how the UK Government can use the lessons of the Covid-19 challenge to address the climate emergency in a proactive and positive manner.