Addressing the annual CBI Conference today, the Prime Minister called for an unremitting focus on catalysing innovation across the economy to combat the stagflation afflicting the UK.
Following the Chancellor’s Autumn Statement last week focussing on boosting education and skills, he outlined the importance of both public and private sector investment in skills, science, and research.
Referencing President Franklin D. Roosevelt’s call for “bold, persistent experimentation”, Sunak said he wanted to “lead a country where that mindset and that culture of innovation permeates every aspect of what we do, where it is at the heart of our economic policy”.
Following the speech, the Business Secretary announced up to £484 million in research funding to support the R&D sector, in response to the EU’s refusal to finalise the UK’s association to Horizon Europe and other related EU science programmes as agreed under the Trade and Cooperation Agreement (TCA) in 2020.
Innovation, innovation, innovation
With the Office for Budgetary Responsibility forecasting a two year recession, and some of the slowest growth rates in the G7, the Government has been keen to outline policies that will ensure the recession is as short and shallow as possible.
The Prime Minister was today eager to outline the importance of innovation as a growth-driver for the UK. However, after the Prime Minister was forced into a u-turn to attend the COP27 summit of world leaders in Egypt, he has been widely criticised for not mentioning net zero, renewables, or clean technology in his speech today.
Labour have been keen to promote their green jobs plan to boost economic growth. At last week’s Autumn Statement, the Shadow Chancellor, Rachel Reeves called for “a fairer, greener, and more dynamic economy, creating jobs across every part of the country in homegrown renewables, green hydrogen, and carbon capture and storage.”
In response to the Prime Minister’s speech, Director General of the CBI, Tony Danker said “it was great to hear the Prime Minister’s deeply held convictions and passion for innovation, and the role it can play as one of the most important drivers of the UK’s future economic growth.
“The Prime Minister started to lay out a vision for a new approach. But what we didn’t get today are the details of the measures to achieve it. Businesses are making investment decisions now and need to hear more on this agenda as soon as possible.”
Is immigration the answer to economic woes?
In his speech to the CBI conference in Birmingham, Danker told the conference that the UK should enable “economic migration” in areas where skilled workers cannot be found.
He called on the Government to “be honest with people” over the UK’s “vast” labour shortages, adding “we don’t have the people we need, nor do we have the productivity”.
As the Bank of England is forecasting a doubling of unemployment by 2025, the Prime Minister has been keen to focus on reskilling UK workers rather than loosening of immigration controls.
Addressing the conference in Birmingham, Sunak said he wanted to attract “the best and brightest from around the world” to work in the UK.
Laying out his plans to create a Silicon Valley style economy post-pandemic, he said he wanted “one of the world’s most attractive visa regimes for entrepreneurs and highly-skilled people”, particularly experts in artificial intelligence.
However, he said that “tackling illegal immigration…is his number one priority right now.”
“If we’re going to have a system that allows businesses to access the best and brightest from around the world, we need to do more to give the British people trust and confidence that the system works and is fair,” said Sunak.
A Swiss style arrangement
Following reports by The Sunday Times over the weekend that senior government figures were considering the merits of a Swiss-style deal with the European Union, the Prime Minister was keen to distance himself from the rumours.
Speaking at the conference, the Prime Minister said: “I voted for Brexit, I believe in Brexit.
“I know that Brexit can deliver, and is already delivering, enormous benefits and opportunities for the country.”
Senior Conservative backbenchers have voiced their opposition to the briefed options with former Treasury Minister and Liz Truss loyalist Simon Clarke tweeting: “I very much hope and believe this isn’t something under consideration. We settled the question of leaving the European Union, definitively, in 2019.”
Lord David Frost, who negotiated the existing deal, said: “I hope the government thinks better of these plans, fast.”
Although Switzerland is not a member of the EU, the country does have several agreements including access to the single market for most of its industries. It also benefits from freedom of movement and pays into the EU budget.
Final thought
If the Government’s vision is to create a Singapore on Thames hotbed for innovation, today’s speech came up short on detail. The idea has certainly been aired and business is already well briefed on this line of thinking. However, the Department for Business and Treasury have yet to set out their detailed plan for how to deliver on the ambitious vision.
For example, if the UK is to become a competitor to California there needs to a be a radical reform of venture capital with much more risk sharing and a cultural shift to fail early. There would also need to be an overhaul in the rules of stock exchanges to allow for more unorthodox listing of tech companies, particularly relevant as the London Stock Exchange falls behind Paris as the largest in Europe. Sunak understands that governments create environments or conditions for businesses to succeed. However, today all we got was more vision.
Over the coming months, policy institute Curia will be focussing on ways in which the Government can unlock growth opportunities through a reform of the culture and business environment. Through the transformation of skills, the Government can enable more high-tech businesses to access coders, engineers and technicians. Through investment in new technology, outcomes can improve, but without the trained staff to operate these new technologies, growth is near impossible.
A thought through approach, in the short-long term will help unlock many opportunities for UK PLC, it is now for the Government to urgently outline the ‘how.’