Over the summer I set out some key questions I felt had yet to be answered about the challenges and opportunities presented by Brexit. I then had the pleasure of participating in two fascinating and very different discussions with leading thinkers at our events at the Labour and Conservative party conferences.
The consensus was that the time has come to move from discussion to action, with a series of pragmatic solutions that lay the groundwork for a future where skills, technology and exports will deliver post-Brexit prosperity. What I took away from these discussions were seven key areas where government and the business community need to work together now in order to rebalance and bolster the economy for the journey ahead.
- Strengthen our economic strategy
We need to balance our focus on the shape of the EU exit with a stronger focus on our own economic strategy and pressing on with implementing the Industrial Strategy. Getting the fundamentals in place will help get our export strategy pinned down and stimulate productivity across the regions by embracing a richer sectoral mix – from pharma and advanced engineering to technology and regional financial services. That means government and business alike will need to have answers for key questions like: what do we want to be known for; what does a post-Brexit global strategy look like and what roles do LEPs, cluster and the regions play in delivering success? Collectively, we must be bold, investing in skills, infrastructure, R&D, clustering and long term patient capital so our key sectors can invest and take risks.
- Focus on meaningful productivity
Time and time again, this came up in discussions: If we are to compete on the global stage we need a stronger focus on our productivity. However, I was intrigued by my conversation with James Cooper, CEO of Associated British Ports, who said that just focusing on greater productivity is not enough, it is not always meaningful to compare UK productivity against that of other countries when our products differ or, in the case of new products and services, no productivity benchmarks exist. Our focus should be on identifying and delivering high quality products (and services) that consumers, in the UK and overseas, want to buy. This has inspired me to dig a bit deeper into productivity and the global data around links to economic growth. I will publish further thoughts on this later in the year.
- Invest in building the mid-level skills base
We need to identify different strategies for overcoming skills shortages and one way to do this is to invest in building the mid-level skills base around the country, which is currently a gap. Businesses must take seriously the challenge of training the transient millennial workforce and collaborate to develop retention and reward strategies that balance the more frequent staff turnover. Building practical skills to support technical and manufacturing sectors also means making vocational training appealing to young people and their parents, and valuing technical skills more in the education system. I heard a suggestion that businesses should offer local schools the chance to visit in order for young people to better understand the full range of career choices available to them. This is something I intend to pursue at PwC to build on the relationships we already hold with schools.
- Plan for a variety of scenarios for the future of Sterling
While depreciation of Sterling can be good for British exports there are also downsides that will require mitigation. For many British manufacturers, inputs are bought in euros and as planning is conducted over a multi-year life cycle, currency exchange benefits at any single point in time, in an otherwise volatile currency market, are unlikely to provide a reliable basis for financial planning and investment. Public and private sector alike will need to consider mechanisms for supporting businesses who are importing or exporting to hedge or offset currency exchange risk
- Collaborate on trade promotion and support mechanisms
Recognising that free trade agreements take many years to negotiate and that businesses take time to respond to incentives and government support, we need to lay the groundwork now for providing continuity of the right support over the long term. Government should engage businesses in shaping the services and support they receive and businesses need to get involved. At PwC we are planning some research with our private sector clients this autumn to explore their service needs, which will support this challenge.
- Prepare for independent regulation
A recognised challenge as we exit the EU will be disentangling decades of co-created regulation and taking the opportunity to deliver smarter regulation that is more proportionate, minimising the impact of perceived ‘gold plating’ of EU regulation. Setting our regulators up for independent regulation – most likely as collaborators with the EU rather than as implementers of EU regulation – will in some cases require a complete transformation of operating models, ways of working and ways of engaging with business. With regulation acting as a critical non-tariff barrier to free trade, bolstering UK regulatory bodies who will be challenged with creating continuity in the regulation of markets, as well as managing ongoing alignment with EU regulation, needs to start now.
- Learn from others around the world
I have been reminded that while the position we are in is unprecedented, there are other countries who have been at similar turning points in their economic and trading history and have gone on to thrive. Sir Lockwood Smith’s description of turning around the New Zealand economy by removing protectionist measures such as tariffs and agricultural subsidies was a powerful reminder that not all of our destiny is tied up in our negotiations with the EU and others. Looking more deeply into the economic case for removing tariffs on imports to the UK is also on my personal ‘to do’ list.
I am encouraged by these recent conversations, which demonstrated that people from across the political spectrum, the business community, academia and think tanks, even if not agreed on the answers, are engaged and recognise it is time for action.
My challenge to you, whether you are in the government or private sector, is ‘don’t wait’. We each have our role to play. Decide how you will contribute to these areas and take action now.
With the support of the PwC, Prospect hosted a series of round-table discussions at the 2017 Conservative and Labour Party Conferences on how trade policy and export promotion could help support the successful delivery of Brexit and a local industrial strategy.