Britains Dangerously Narrow Economy

The recession is carving into every sector of the economy. From luxury goods to
construction, from cars to retail. One of the most worrying aspects is that it is also seriously eroding the high technology industries.

When Britain was undergoing change from a manufacturing economy to a service based economy it was always argued that banking, finance and administration would replace the great industries of yesteryear such as ship building, coal and steel. The other great pit prop for the economy would be the science based industries. High-tech was the all embracing phrase which quickly became a part of the everyday lexicon.

Wise birds such as the late Arnold Weinstock – one of the most important industrialists the UK produced in the post-war era – warned years ago that if Britain’s decline in manufacturing continued at such a pace there would soon be nothing left to service.

In the twilight of his career Weinstock witnessed two tragedies: one personal, the other professional. His son and heir Simon died prematurely. GEC, the electronics and defence colossus that he had built with both ruthlessness and scrupulous care, had virtually collapsed within months of his retirement.

Its new bosses had switched into the high-tech boom and the strategy blew up in their faces. It was an ignominious end for a once proud industrial empire that had been regularly criticised for building a cash mountain instead of investing in high-tech sunshine industries. When it did, under its new proprietorship, it ended in disaster.

For decades – since 1945 – the sirens have been sounding long and hard about the manner in which Britain’s manufacturing sector has been allowed to slip away. The UK is now reeling from the consequences of having most of its eggs in too few baskets.

It needed – and now more than ever – an economy which is more widely based. If one looks at the UK’s historical pre-eminence in manufacturing, a skill base which has been squandered, it should today have more than just banking and high-tech.

Even those two sectors are primarily foreign owned and run. Britain has become little more than a carrier for other nations’ industries. A danger is that if a foreign owned bank wished to up sticks and quit the UK lured by a more conducive climate in some other country, it can do so virtually overnight.

In simple terms you can unplug terminals in London and be plugged back in in New York or Quatar or Frankfurt within hours. You can do it with a car company. But it’s more hassle. It’s difficult and costly to move machinery and to set up new production lines. But given that the UK car industry is entirely foreign owned – nothing is off the agenda.

With banking so bombed out the UK’s dependence on its other ‘pit-prop’industry begins to increase. The news that Microsoft, another iconic name and in its field a world leader, is to shed 5000 jobs will send shivers through those concerned about the narrowness of Britain’s economic base. Over the past few turbulent months there have been a surfeit of warnings from myriad household names in the science and high technology sectors.

Other ‘service’ industries are taking a mighty hit. Hotels, hospitality, restaurants and coffee house chains. These are the frothy businesses which prosper when times are good.

But they are not the great economic drivers that will pull the UK out of recession. The supermarket chains that have caused such devastation on the high street – and the extinction of so many independent outlets – now hold out the promise of new jobs. Good news? Well, yes and no. Yes in that any company which offers jobs when the UK has two million unemployed – three million by the end of 2009 – is to be applauded.

But what sort of jobs will they be? They will be largely unskilled, many of them part-time and they will pay minimum wages. In the future Britain must be more than a nation of shelf-stackers and counter-hands and cleaners and packers – even though each of those is a perfectly honourable and highly necessary job. It is crucial that the UK gets back to encouraging vocational skills, to apprenticeships and to proper training programmes.

Had such a policy been pursued more vigorously Britain could have cashed in recently on the great maritime boom. There are now more luxury private yachts being built than at any time in history. There has also been an explosion in the holiday cruising market. Until the start of the recession India and China were buying just about anything which would float to export their goods. The world also woke up to the need for strong navies with aircraft carriers and nuclear submarines. And who has been building all these craft?

Sadly, and disgracefully, the UK managed to achieve only a fraction of the orders. The bulk of the work was grabbed by yards across Germany, France, Italy, the Netherlands and a hundred other places. It is a shameful record for a nation which was once the world’s greatest maritime power. The UK’s shipbuilding prowess, its mercantile importance as a trading island and the excellence of its navy were all unquestioned.

The UK had, and could have again, the world’s finest pool of highly skilled and motivated shipbuilding workers. It is not chains of dress shops or hotels or coffee bars but major employers in industries that are politically, strategically and economically vital, such as shipbuilding, that could and would help to propel Britain out of recession.

The aim should be to resuscitate the ‘traditional’ manufacturing industries such as cars and motorbikes and shipbuilding and harness them to the ‘new’ and equally vital sectors such as banking and the science industries which have recently taken such a battering.
With a two-pronged economy – vigorous in both its heavy and its lighter industries – Britain would be in a robust position to take full advantage of the upturn. It would also have freed itself from the vulnerability of having its economy built on foundations which are too few and too slender when the winds of recession begin to howl.