CBI boss John Cridland has told a legal conference why the UK needs an industrial strategy that supports specific sectors.
Mr Cridland was speaking at Pinsent Masons’ last lecture in a series on economic renewal on May 21st in London.
He said the Government needed to “tilt the playing field” to support sectors of the economy where the UK had competitive advantages. He said that the effective use of “policy and funding levers” was essential to allow the UK’s manufacturing, creative and service sectors to compete globally.
“This is as much about service sectors where we have strengths as it is about manufacturing sectors where we’re getting stronger,” he said. “Our world beating business and professional services, our world famous education sector, our dynamic creative industries experience very similar issues to the aerospace and automotive sectors.”
“What’s critical is identifying where a long term partnership between business and government can make the greatest difference when it comes to encouraging investment and boosting exports,” he said.
Despite needing to make “hard choices” before June’s Spending Review, government support for research and development and innovation was a priority. In addition, the government must do more to support medium-sized companies in the supply chain, he said.
In September last year, Business Secretary Vince Cable said that the Government would focus on “specific sectors” and develop a series of “collaborative but challenging” strategies including industry partnership and targeted support as part of a new industrial strategy for the UK.
A sectoral approach would help aerospace, automotive and life sciences, education and professional and business services sectors, among others, Dr Cable said.
Mr Cridland said that this approach was long overdue as a means of rebalancing the economy. However, he said that much of the policy work on industrial strategy was happening “below the radar”, away from more high-profile stories about the tax arrangements of multinational companies.
The growth of the UK’s automotive sector since the financial crisis, driven by strong leadership of the Automotive Council, was a “pilot case that demonstrates how successful” a long term, sectoral approach could be, Cridland said. The Government has also already taken some “positive steps” to improve the business environment as part of its more general growth agenda, including the gradual reduction of the headline corporation tax rate from 28% towards 20% by 2015, he said.
Cridland addressed the tax avoidance debate, referring to the CBI’s seven tax principles for UK businesses.
The document states that businesses should engage only in “reasonable tax planning” that “does not lead to an abusive result”, and emphasises the need for relationships between businesses and the tax authorities which are “transparent, constructive and based on mutual trust”.
Cridland said that companies had to “get better about communicating what they do” and “convince the public with their credentials”.
He said that the proportion of the UK’s exports going to countries outside of the EU was increasing, particularly to the BRICs and developing economies. However, he warned that although falling exports to the EU currently accounted for a “drag of nearly 1% on GDP”, the “economic implications” of distancing the UK from the EU could not be overstated.
“Despite the European slowdown, our participation in the single market allows us excellent global positioning to sell our goods into emerging market economies,” he said. “If we want to retain the benefits of the Single Market, we must find a new, reformed balance between Eurozone members who want to integrate further and those outside the single currency who don’t.”
The lecture was hosted by David Isaac, Head of Advanced Manufacturing & Technology Service sector at Pinsent Masons.
It ran concurrent with the National Manufacturing Debate at Cranfield University which also discussed the need for a national industrial strategy.