By Barry Edwards
Hurricane Sandy has dominated the news this week moving any financial announcements out of the headlines except the report by Michael Heseltine which was presented to the government and announced to the press on Wednesday (31 October 2012).
The full report is 233 pages long and is full of research and statistical information supporting the main recommendations, the Financial Times has published a summary of it. Their brief synopsis is set out below.
Growth. Need for long-term vision. He calls for a long-term growth strategy and a National Growth Council, chaired by the prime minister, senior ministers and government advisors.
Devolution. Offer £58 billion to bidders. Funding for business support over four years should be stripped from Whitehall budgets and opened up to competitive bidding by England’s 39 Local Enterprise Partnerships.
Takeovers. Use laws to intervene. Use legal powers to consider intervening in foreign takeovers of UK companies to ensure long-term industrial capabilities are considered.
Airports. Bring forward report. The government should make clear its preferred solution to airport capacity in the southeast before the next election and bring forward Sir Howard Davies report to next year.
Chambers of Commerce. Make them one-stop shops. Chambers of Commerce should have statutory functions and an enhanced role as a ‘one-stop shop’ to deliver business support, as in Finland, Japan and Sweden.
It is good to see somebody proposing that government should have an economic growth plan for the next 5-10 years and setting up the framework to be able to deliver that. However, there is little mention in the report about the more detailed measures that could be introduced to substantially enhance the effectiveness of the overall plan which should be provided by the private sector. Although to be fair Michael Heseltine was asked to present a framework for growth and not the minutiae that would make it happen.
The main thrust in the report is that proper cooperation and decision making should be the responsibility of local government and local businesses. Funding should be devolved to the regions and cities around the country with Whitehall only participating in national policy. This would make an enormous difference to the effectiveness of decisions about growth and investment locally
The UK economy is imbalanced and geared too much to the financial services sector and underutilised industrially where there are many people unable to practise their skills which are still in abundance throughout the country. High tech industrial production is unsuited to be carried out on the other side of the world to meet the constantly changing and evolving demands of business to compete worldwide in many new sectors that are developed here in the UK.
Nurturing these businesses to grow and develop properly requires another set of skills and experience that is just not yet available in China and the low cost manufacturing countries. On top of that, many of these Asian countries are having to substantially increase the wages they pay their workers as they begin to become part of the global economy. This reduces the cost effectiveness of having manufacturing situated on the other side of world with the long delivery times involved with the constant need to update product much more quickly these days. This is making companies reconsider where their product is made and the demand for that to happen in the UK is increasing all the time.
The financial community is going to have to learn how to finance this development again and properly support the reindustrialisation of the UK together with the engineering consultants and specialist professional advisors required to make it a reality.
There is a lot more that needs to be done to improve access to the whole range of funding, support and advice to SME’s that are the backbone of the economy of this country. Government has been struggling to come up with a solution to this fundamental problem ever since they were elected. Also, it is not just the funding that is needed; it is the whole approach to encouraging these new businesses to start, grow and develop into successful companies that needs to be part of government policy.
We will see if the Heseltine report starts the process of making all this happen, it is a good beginning but government must continue encouraging and stimulating business in as many ways as it can.
(There is a paper entitled The Economic Growth Plan in the right hand column if you wish to read about some new innovative ways of implementing organisations to manage the funding of SME’s, commercial and industrial projects and infrastructure.)