24 May, 2012
The Growth Factory report
Posted by: Damian
Today I have a launched ‘The Growth Factory’ report which can be found online at www.thegrowthfactory.co.uk
The Growth Factory brings together new thinking on how we can rebalance the economy to provide the growth the UK needs in the 21st century. At the heart of this is a modern industrial strategy which defines the relationship between government and business and sets clear objectives for working together.
The Growth Factory focuses on industries, the productive enterprises, in different sectors which we believe will be vital to the UK’s success in the coming decades. Whist we are now and will continue to be a leading global force in business services, we are also one in many different areas of manufacturing and design. The growth in the 21st century economy around the world may mean that our total share of world output declines, but the opportunities to expand into new markets outside of the European Union will be even greater. We may have a smaller slice, but it will be of a much bigger cake, meaning there will be more for everyone.
The UK can compete with the best of the world in many sectors of the ‘making it’ economy, where your wealth is based on your ability to make products you can sell, and not just the services around them. The Growth Factory looks at a number of these sectors, from aviation and the automotive industry, where we have just become a net car exporter for the first time since 1976, to the creative and digital sector where Tech City in London is now the world’s third largest digital hub, and high-end engineering, where our firms are winning back business from China.
The industrial strategy of the 1970s saw Governments give direct financial aid to failing industries in order to protect jobs. Here people were in effect being paid to build cars that customers didn’t want to buy. That approach was unsustainable and it was in time new ownership, leadership, design, innovation and the commitment of the workforce that ultimately saved businesses like Jaguar and Land Rover from the state run motor industry. 21st century industrial strategy is not just about identifying where direct financial assistance can help accelerate the development of a business or economic region, as we are seeing in the Government’s strategy for enterprise zones and the regional growth fund. This has also been important in the development of new economic clusters, like Tech City, where Government support has acted as a catalyst for private enterprises to bring in much greater levels of investment. In addition to this we have to ensure that our tax and regulatory environment helps UK firms that are competing in a global economy to thrive. This is why, for example, the tax credits announced in the last budget for the production of high end television series, animation and video games were so important. Despite the UK having some of the best practitioners in the world, we were losing business to other countries that could undercut us on price significantly because they offered tax incentives to investors.
Given the turbulence in the world economy it would be easy to say that the idea of laissez-faire economics, where the Government simply looks to create the best possible conditions for growth and leaves the rest to the market, is dead. With high levels of unemployment in Europe in particular, people require more of their leaders and to see evidence that they are straining every sinew to help create competitive advantage in their economies. In truth, laissez-faire never existed. Governments have always looked to support business innovation and growth through offers of matched funding, inducements for overseas investors and changes to the business tax regime. The challenge is to get the right policies for the right time.
In ‘The Growth Factory’, our contributors have suggested ideas for the industrial strategy we need for the 21st century. We have focused on ideas to support business activity now. This is the start of a debate in which all contributions and particularly those from the business community are welcome.
The Growth Factory includes 30 ideas to consider now to support our 21st century industrial strategy
1. A new runway for the south east of England before 2020
2. Commitment to the extension of high speed rail from London to Birmingham, Manchester, Leeds and Scotland
3. Local Enterprise Partnerships to support the development of a creative and digital business hub and incubator for every major town and city
4. Extend the Research and Development tax credit to include any UK registered intellectual property
5. Create a mechanism for green aviation taxes to be re-invested in the development of cleaner and quieter engines
6. Promote awareness of the new Seed Enterprise Investment scheme to encourage more non-bank lending to start up businesses
7. Increase the number of aerospace engineering places at UK universities
8. Appoint a Chief Engineer, on the same level as a Chief Scientific Officer, and task them specifically with raising the profile of engineering inside and outside of Government
9. Support the increase in the number of UK suppliers to the European Organisation for Nuclear Research (CERN) where we have only met 25% of entitlements for contracts, whereas France has twice theirs
10. Re-introduce sector specific trade missions and receptions through the Foreign Office’s embassies and consulates in developing economic markets
11. Explore extending the export guarantee initiative to other sectors outside of the film industry
12. Promote awareness of the £10million Start-up loans pilot scheme announced in the budget to support micro-loans, alongside training and mentoring for young people starting a business.
13. Government to look at supporting the international secondment of UK business experts to help develop contacts and new markets in emerging economies
14. The Export Credits Guarantee Department should do more to target support and build awareness of its services with smaller businesses interested in exporting
15. Review the cap on the number of PHD level students from outside of the European Union who can be employed be a single company
16. Only allow Ofcom to represent UK domiciled employers and tax payers to the International Telecommunication Union
17. Develop plans to support the building of the world’s second only ‘Spaceport’ in the UK and consider UK participation and support for the Material International Space Station Experiment
18. Similar to government support for research into the use of grapheme, we should look at investing in synthetic rare earth development, renewable replacements for minerals and reengineering some key industrial processes away from high intensive energy consumption
19. Support the development of more offshore wind energy parks
20. Consider reducing the amount of capital reserves that banks need to hold against business loans
21. Look closely at the process of securing a UK banking license with a view to making it easier for new entrants into the market
22. The Government should look to share risk in support for research and innovation. Google owes some of its success to the US National Science Foundation grant that funded the discovery of its foundational algorithm.
23. Increase Government procurement from small and medium sized businesses
24. Consider simplifying the taxation framework to support more employee ownership of companies
25. Complete plans to launch a Digital Copyright exchange to support innovation and protect the rights of content creators
26. Work with the NHS to support it becoming more open to adopting innovations in the developments of new drugs and treatments
27. Work with industry to help deliver reliable security protocols to protect online payment systems
28. Support more data sharing between government and private sector organisations to support innovation in delivering services
29. The Government should make the Carbon Reduction Commitment less bureaucratic making it easier for manufacturers to positively engage in the process and reduce their emissions rather than be penalised by the scheme
30. The Government should expand the ‘See Inside Manufacturing’ programme and consider making it available to all schools