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New Economy Hides a Radical Change

It seems there’s gathering momentum that a New Economy will emerge in the UK post the financial sector meltdown and it will be based on manufacturing – that was the message I took from a Policy Exchange meeting at the Royal Institution today.  Well, that’s a load of twaddle of course because what people really mean is some re-balancing between the sectors, whilst we must mention ‘services’ too because actually that’s where we all work more or less isn’t it?  It is a serious point though and we really do need to stimulate manufacturing because we quite simply look a bit underweight against certain peers plus we need more output that is as readily exportable as manufactured goods.  Otherwise what’s the point of being a trading nation/ an open economy? Clark demonstrated great mastery of his brief and offered thoughts on what might be done about things if the Tories get in next year.  For a start, he doesn’t like the idea of supporting national champions and he feels government needs to really understand the value chain before it offers support.  Regarding the latter he cites a previous government’s mistake in championing chip manufacture as a way to profit from the computer boom (“fortunately they went bust before we could waste any more money”).  He also showed a good grasp of the dynamics in the entrepreneurial sphere – the need to create and support the fast growth companies and the problems facing the VC industry in playing its part in that.  He was at pains to say that the Tories’ policies are known only to George Osborne so we can but hope that Osborne is listening to his elders – for now though it was mission-accomplished for KC as we all felt soothed.  Meanwhile on the Labour side there was a lot of endorsement for some things that have been brought in – not least the Technology Strategy Board which many people felt was the right configuration at last – even if it’s underfunded and hasn’t quite got all its ideas up and running.  If we do indeed change government will they be big enough to keep the good things that have been achieved?

Meanwhile I can’t help feeling that debating the nuances of capital allowances, R&D tax breaks et al might just be a case of ‘fiddling whilst Rome burns’.  Aren’t we in the middle of a massive economic crisis – one that has yet to properly impact most of us?  Another fairly recent report highlights the role of Defence and related industries in the UK economy… written in an effort to stave off cuts to the sector.  Those cuts (as surely there must be some) could have a huge impact on manufacturing in the UK – directly and indirectly.  Right now the focus seems to be on reducing the wage bill for government bureaucrats working in Defence and some talk about all our troops getting the equipment they need.  I cannot help wondering though whether that equipment is in fact going to be needed.  Whilst trying to steer clear of party politics, it strikes me that the warning bells from all points about the Tories’ ‘Little Englander’ stance are well founded.  Norway, yes Norway is being mentioned as the model towards which the Tories would like to work.

It’s all so complicated and beyond simple measures how on earth can the politicians sort this all out?  I really would like to see a high-tech manufacturing-led recovery but I wouldn’t bet on it would you?  I’ll stop on that sobering thought.

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