In its six reports on “The Sustainability of the UK Economy in an Era of Declining Productive Capability”, the ERA Foundation (ERAF) has studied the factors needed to ensure that UK manufacturing can take its necessary place at the heart of a well-balanced economy.
Successive government administrations over the past 25 years have promoted the UK as a “post- industrial economy based on financial and business services”. The resulting over-reliance on financial services has left the UK with an economy which is seriously out of balance. What remains of UK manufacturing is of very good quality; there is just not enough of it.
The Coalition Government has been seeking to rebalance the economy, and respect for manufacturing has been restored. But Government respect has yet to be matched by bold actions sufficient to return UKmanufacturing capability towards 20% of GDP (from its current 11%) and to see the trade gap closed by the working of a balanced economy. Investment incentives are needed. Energy costs must be controlled.
Supply chains need to be rebuilt. Artisan skills need to be nurtured. SMEs must be able to gain access to finance on sensible terms. Corporation tax needs to be substantially reduced. Government needs to promote innovation through smart procurement. Entrepreneurship needs to be encouraged, supported and rewarded.
For the correct actions to be taken, the scale and nature of current problems must be understood with conclusions based on reliable data. This has been the basis for the series of ERAF reports. Continuing this approach, the ERAF has constructed a list of key questions for Oxford Innovation/SQW to research the UK’s performance as an ‘Open Economy’ where foreign direct investment has been welcomed without question or constraint. The full SQW report can be found on the ERAF web site (https://www.erafoundation.org/
reports.htm). We are grateful to SQW for their thorough research.
The questions are:
- What is the value of trade in goods and services to the UK, and how has this changed over recent years?
- What drives the UK’s export earnings and how have these changed in terms of goods and services respectively?
- What proportion of the UK’s exports is associated with Financial Services and what components make a major contribution to the trade surplus in Services?
- What is the value and composition of Foreign Direct Investment (FDI) to the UK, and how has this changed over recent years? How significant are the sale of UK assets in the FDI data?
- What proportion of FDI is directed towards the outright purchase of UK companies as compared to investment in new productive capacity (plant, equipment)?
- The UK’s Open Economy is claimed to have brought major benefits to the nation. What are these benefits and how do they compare with the disbenefits? Comments and conclusions drawn by the Foundation, based upon the SQW data, are presented throughout this report; these are the Foundation’s responsibility