Recorded at the Battle of ideas 2015.
While the UK economy has
recovered from the economic crisis, few would argue that the recovery
is built on strong foundations. Wages are only just starting to rise in
real terms after a number of years of decline. Economic output remains
weak compared to previous recoveries, and the state is still spending
almost £90 billion a year more than it receives in tax. A ...
Recorded at the Battle of ideas 2015.
While the UK economy has
recovered from the economic crisis, few would argue that the recovery
is built on strong foundations. Wages are only just starting to rise in
real terms after a number of years of decline. Economic output remains
weak compared to previous recoveries, and the state is still spending
almost £90 billion a year more than it receives in tax. A particular
concern for economists is low productivity – the amount of wealth
produced by each worker – which is well below that of other countries
and 15 per cent below where it would have been if pre-crisis trends had
continued.
Yet across the main political parties there seems little vision of
how the UK economy could look different in five, 10 or 20 years’ time.
The chancellor of the exchequer, George Osborne, has made much play
about the creation of a ‘northern powerhouse’. The HS2 railway has
cross-party support, but many are sceptical about its economic
potential. Beyond this, there seems little sense of how the economy
could be transformed. Indeed, many new industries with the potential to
revolutionise the UK economy – like fracking, nuclear power and biotech –
have faced considerable resistance.
In 2014, the Wright Report, an independent report commissioned by the
Labour Party, called for ‘a modern, active industrial policy’ that was
not about ‘government “picking winners”, investing in large companies,
or trying to plan the economy’ but focused on ‘improving the environment
in which companies operate, recognising the positive influence that
government can have, and working together to tackle the challenges’.
These included barriers to investment, the overall load of taxation and
the lack of skilled workers, all still serious problems. That said,
there are causes for optimism. In certain sectors, productivity has
risen sharply in recent years. Productivity in car manufacturing is
high, while in aircraft engine manufacturing and financial services, the
UK is a world leader. Moreover, the UK’s universities offer excellent
capacity for research and development.
If UK businesses can be excellent in some arenas, why is the UK
apparently so unproductive overall? What are the barriers to a new and
innovative economy? Why is new business investment so low? Do we need a
bout of creative destruction, making painful choices about leaving some
areas of economic activity behind, in order to allow new sources of
wealth creation to flourish?
Frances Coppola
associate editor,
Pieria; contributor to Nesta’s
Our Work Here is Done, exploring the frontiers of robot technology
Katie Evans
economist, Social Market Foundation
Phil Mullan
economist; director, Epping Consulting business advice; author,
The Imaginary Time Bomb
Bauke Schram
business reporter,
International Business Times UK
Mike Wright
executive director, Jaguar Land Rover
Rob Lyons
science and technology director, Institute of Ideas
