Read the full transcript of our interview here
1) Some of the old ways of measuring an economy need revision
“I have every sympathy with the ONS: they are measuring a rather different economy. They are not alone in having had challenges. The Bank of England had challenges with what would happen with inflation because the old model concerned domestic generated inflation, and we’ve had globally generated inflation. Business investment figures tried to capture a different form of business model. In 2008/9, businesses didn’t do in Britain what we’ve done in every other recession. We did not cut and slash, we did not get rid of large slabs of labour. Unemployment went up and that was very serious for the individuals concerned. Most economists expected unemployment to go through 3m—it stuck at 2.5m, because the skills were more valuable.”
2) The distinction between being either a services-based economy, or a manufacturing-based economy is “almost a false one.”
“Manufacturing exports are half of UK exports. In every advanced economy, services are predominant in volume and you would expect that. But Britain is still in the world top ten manufacturing exporters. Manufacturing is absolutely vital to business research and development and absolutely vital to exports and is an important multiplier. The distinction between the manufacturing sector, industrial sector and service sectors is becoming an almost false one. Quite a lot of service activity takes place in manufacturing companies. Manufacturing companies produce something but they then have value added on the servicing of those products. You see more and more profit and loss accounts where a lot of the income comes from the servicing of something that was sold as a manufactured good previously.”
3) Britain’s education system is not working—businesses are having to compensate for this
“We have under-performance in our education system where too many young people are leaving school at 16, failed by the system, without the qualifications that they need for working life. It’s business that picks those people up. The test is: do those young people progress, do those women returners achieve the same value added that they were contributing to the economy before they had a family?”
4) Businesses face heightened political risk.
"There's more political risk and we have a sort of unique cocktail of issues between the European parliament elections, the general election and a potential European referendum. There's a period of relative political uncertainty. Business lives with that, it always lives with an element of political uncertainty."
5) The government got it wrong on spending.
“I think the first thing is, government, with the benefit of hindsight, cut public sector capital too far.”
1) Some of the old ways of measuring an economy need revision
“I have every sympathy with the ONS: they are measuring a rather different economy. They are not alone in having had challenges. The Bank of England had challenges with what would happen with inflation because the old model concerned domestic generated inflation, and we’ve had globally generated inflation. Business investment figures tried to capture a different form of business model. In 2008/9, businesses didn’t do in Britain what we’ve done in every other recession. We did not cut and slash, we did not get rid of large slabs of labour. Unemployment went up and that was very serious for the individuals concerned. Most economists expected unemployment to go through 3m—it stuck at 2.5m, because the skills were more valuable.”
2) The distinction between being either a services-based economy, or a manufacturing-based economy is “almost a false one.”
“Manufacturing exports are half of UK exports. In every advanced economy, services are predominant in volume and you would expect that. But Britain is still in the world top ten manufacturing exporters. Manufacturing is absolutely vital to business research and development and absolutely vital to exports and is an important multiplier. The distinction between the manufacturing sector, industrial sector and service sectors is becoming an almost false one. Quite a lot of service activity takes place in manufacturing companies. Manufacturing companies produce something but they then have value added on the servicing of those products. You see more and more profit and loss accounts where a lot of the income comes from the servicing of something that was sold as a manufactured good previously.”
3) Britain’s education system is not working—businesses are having to compensate for this
“We have under-performance in our education system where too many young people are leaving school at 16, failed by the system, without the qualifications that they need for working life. It’s business that picks those people up. The test is: do those young people progress, do those women returners achieve the same value added that they were contributing to the economy before they had a family?”
4) Businesses face heightened political risk.
"There's more political risk and we have a sort of unique cocktail of issues between the European parliament elections, the general election and a potential European referendum. There's a period of relative political uncertainty. Business lives with that, it always lives with an element of political uncertainty."
5) The government got it wrong on spending.
“I think the first thing is, government, with the benefit of hindsight, cut public sector capital too far.”
