08 March 2021
The Great British Reboot
How the UK Can Thrive in a Turbulent World
2021, Yale University Press, 336 pages,
Reviewer: Christine Shields
In a wide-ranging and upbeat analysis, Alex Brummer paints an ambitious outlook for the UK. He assesses the background to the Brexit vote, pointing to the popular frustrations that in his view stemmed from the consequences of the 2008 financial crisis and the subsequent direction of government policy. Within the context of the policy options, he tries to highlight particular areas of strength now that have the potential to push the economy into a more prosperous future.
As I worked my way through the book, I was reminded of a Thought Leadership piece I was involved in at Standard Chartered Bank in 2010. The Super-Cycle Report focused on the long term potential of Asia, Africa and the Middle East rather than the UK or Europe but the principle is similar. Key to long-term success in the Super-Cycle were Cash, Creativity and Commodities. For Brummer, the UK’s future should be about innovation, economic reform and improved skill levels. National self-confidence is key, but is in relatively short supply just now. Contrasting with the Victorian sense of optimism that embraced the wave of new infrastructure and modernisation, the UK in 2020 is dogged by negativity, exemplified by Remainers in the Brexit debate as well as by the tone of media commentary. In addition, there have been many policy missteps over the years. Bummer highlights allowing foreign takeovers of important national flagships such as Cadbury or Arm so that important technological developments as well as cultural icons are lost. Such mistakes have damaged the economy’s long -term growth potential.
Governments allowed the market mechanism to operate freely, so that inefficiency and inequality has worsened and created arguably more losers than winners – or at least the perception of that. The financial sector comes in for – probably inevitably - criticism, with short-termism highlighted as a real problem. But corporates in general have focused more on cost-cutting at the expense of long- term strategy. This is an error true also of government policy, reflecting not only the electoral cycle but also the decades of dependence on the EU. This latter allowed the government to neglect key priorities such as skills training because European migrants could easily and more cheaply immediately fill vacancies. Since Brexit, that has proved to be a major mistake as many migrants are now choosing to return to their home countries, leaving behind skill shortages that the UK lacks the capacity to satisfy speedily.
More widely, in research and development, academia, and high-tech sectors there are deep links with the Continent. Supply chain links are also significant. As the evolution of the Oxford/Astra Zeneca vaccine attests, supply chains cross borders. And it is in these skilled areas that Brummer posits where the UK could be – is – a world leader. Pharmaceuticals, genomics, financial technology and avionics are all key areas that arguably are world -beating. By contrast, vocational training and apprenticeships need strengthening. Fundamental to both is new investment. However, UK universities tend to be less well-endowed than their US or Chinese counterparts. If research and innovation is to be a key driver of the UK’s future, there is a clear need for better funding.
Joint private/public start-ups may be a way. Electric cars and the accompanying infrastructure are a case in point and prospects so far are looking good.
However, the case of British Nuclear Fuels is salutary. It was sold in 2006 to Toshiba. Now that the UK wants a new generation of nuclear power stations, however, the country has to rely on imported expertise.
Cutting edge technology – as Brummer puts it – is the way ahead in order to boost a knowledge economy. AI, robotics, 3D technology, innovative engineering, aerospace and the internet of things all have huge potential. And fortunately, the UK is already ahead on cyber security. Likewise, creative industry, fashion, film-making, music, literature, gaming and even motor racing are all existing strengths (though Brexit may dilute some of these).
Financial services are an obvious UK strength – but Brexit may do some damage there too, albeit so far less than initially feared. Financial technology, asset management, private equity, hedge funds as well as insurance and banking are all areas of global leadership. Now that green concerns are so mainstream, the emergence of a green product suite illustrates the sector’s ability to be flexible within a strong regulatory framework that has the respect of the world.
There is an excellent chapter on the UK’s social challenges. The north/south divide, generational and income inequalities and job security issues are all explored. Brummer ventures into the social care crisis as well. He makes a number of suggestions to ease the situation, but rues the fact that the whole area has become something of a political football. Teresa May’s proposed social contract – the ‘just about managing’ – is a case in point. Rather than finding some acceptable middle ground, policy makers have tinkered at the margins and the issue has got lost in party politics and clouded by poor competence in delivering what few initiatives survived.
Following from that is his cutting assessment of political decision making. Even though UK bureaucracy is rated world leading by many observers, the popular perception is the opposite – borne out recently by the shambolic delivery of the Covid track and trace initiative, albeit later countered by the success of the vaccination programme. Brummer regards governance as lacking, not helped by the extra layer of bureaucracy thanks to the increasing powers granted to the devolved nations. This has the added complication of putting the Union at risk. The nature of parliamentary representation is the problem here – in 2019, the SNP won 48 of the 55 seats in Westminster with just 45% of the Scottish vote. Perhaps not so representative then.
Nor is the civil service spared. The UK has long been known for following EU rules to the letter when others on the continent took a more flexible approach. Brummer states that effectively the EU had so dominated civil service attitudes, that they no longer have the skills to thrive in a world beyond Europe. Possibly a harsh view (shared by Cummings), though he does welcome the start of reforms in some departments. He delves at length into corporate governance and welcomes Brexit as an excuse to boost new private and public investment to raise productivity and growth potential.
Brummer highlights infrastructure shortcomings as a major constraint on future growth potential. The opportunity offered by low interest rates gives us now the chance to change that. Planning challenges with the mega-projects like Heathrow’s third runway are well known, as are the limitations of our builders delivering on time and on budget as demonstrated by HS2 or Crossrail. And the problems are not just physical. Broadband spread is so poor that rural ambitions can be hard to satisfy for lack of capacity. Openreach and BT are the named causes. Better regulation may be the solution. But new technology will be required for green targets to be met. Hydrogen power will have new needs as will electric cars.
Noting that the UK has many strengths – heritage brands, good governance, rule of law, strong commercial ethics and a culture of tolerance, as well as the royals – Brummer questions why Brits are so negative about themselves. Past crises have created opportunities. Why should Brexit and Covid not do the same? London is undergoing a major transformation even as worries about the City’s future grow. Silicon roundabout, the Kings Cross transformation, Battersea and, of course, Docklands are real successes. The UK has a high standing overseas, he posits (though the Brexit shenanigans have diluted that somewhat, especially on the Continent). Yet government has allowed so many heritage brands to be sold overseas, losing control of key national assets.
Yet Covid has demonstrated the flexibility and resilience of the UK economy. The switch to digital, the flexible labour market, the nimble fiscal support package and the speedy monetary response all illustrate that. The development of the vaccine is a triumph. Inward investment flows have been robust (up 44% in 2019) and more than Germany and France combined. Maybe Europe is sclerotic. And the City may be a pillar of strength but perhaps it has allowed the short -erm pursuit of deals to dominate its activity rather than supporting long-term investment and innovation. Hence the need now to level up as so much of the gains generated by the City have not spread nationwide. This, and especially supporting the young, must now be a priority as the new post-Covid and Brexit economy gathers strength within new green initiatives. Brummer’s view is that a national reboot will do just that.
Others of course will differ. Martin Wolf points out in the FT (23/2/21) that the UK is relatively weak in the high-tech field and R&D. Perhaps this reflects inadequate government support. The result is that the country has fallen behind others because of its low productivity and very disappointing underinvestment. He calls for business to be more innovative, with better links between corporates and universities. Perhaps the message from both is that government needs to be more active and targeted in its intervention. So a government reboot as well as a corporate one. We can only hope.