Our over-reliance on imports is harming the recovery

It is new markets, not existing ones, that are key to securing long-term economic growth for the UK

For all the disagreement about how to fix the UK economy, there are a few truths about the roots of the present slump that most people accept. In the good years leading up to the crisis, Britain lived beyond its collective means, and built an economy that couldn’t last. Part of this excess was fuelled by cheap, irresponsible credit; part of it was built on the UK’s huge and long-standing trade gap. Since 1997, the UK has consistently imported far more than it exported, creating a serious imbalance that paved the way for the financial crash.

Our research, published today, provides new insights into how the UK economy became so unbalanced. Over the last 15 years, the UK has performed extremely poorly by not providing the products which consumers increasingly want to buy. Consumers appetites for certain products has proved insatiable; in 2009 we bought over eight times more consumer electronics and twice as much clothing as we did in 1997. The problem is that most of this growth was met through an increase in imports, and not domestic production.

Many observers see patterns such as these and assume they are driven by well-established economic arguments about international competitiveness, with the high cost of production in the UK preventing more manufacturing taking place here. Whilst this is undoubtedly true of some low cost products - clothing springs to mind - this line of reasoning often falls down, even for low-tech industries. Recent research showed that the UK now imports more than half of its bacon from the Netherlands and Denmark, where wages in meat processing are twice the level here. Even more concerning is our performance in high-tech sectors such as consumer electronics, where the high value of the goods produced tends to override cost concerns. The UK is an anomaly amongst other advanced economies in being extremely weak in these markets.

What is most worrying, however, is the sheer scale of this shift, and the fact that increases in our imports of consumer products have not been compensated by a large enough rise in exports. Take clothing, consumer electronics and vehicles. Together our poor trade performance in these product markets accounts for more than 40 per cent of our goods deficit. This suggests our difficulty in providing consumers with enough of the things they want to buy, even in just a few key markets, can and is acting as a large drag on the UK economy. We have some outstanding consumer facing businesses in the UK, such as Unilever and Dyson. The problem is we don’t have enough of them to reverse the persistent UK trade problem.

So what should the government be doing to put this right? Part of the response should be to try and increase exports of those things that we are good at, including business services like consultancy and architecture. But that will only take us so far - we also need a greater emphasis on trying to foster the emerging consumer markets of the future, and on making the UK a world leader in these areas. This isn’t just about inventing more technologies – it is about how we use them. The UK’s world-class science base is excellent at generating new ideas, but businesses need far more support to overcome the barriers they face in turning these technologies into high-growth markets.

Take 3D printing as an example. The ability to print personalised goods on demand has real potential for the UK economy in the future, but there are many state-controlled levers that need to be co-ordinated to make it actually work in real life. Without the right regulations to foster consumer and business confidence, without standards to make software and materials compatible with each other, without the necessary physical and electronic infrastructure, 3D printing will remain a niche market in the UK, and will probably take off in another country first. We need to get these things right, and quickly, if the UK wants to be a world-leader in 3D printing – and these principles will apply to many other emerging technologies over the next decade.

Policymakers already lay out and co-ordinate their long-term strategy for many established sectors. Just yesterday the Department for Business, Innovation and Skills published their strategic vision for UK aerospace, for instance. But we want to see this approach applied to those new and innovative markets that have the greatest potential for exports and domestic demand. We would argue that it is the new markets, not the existing ones, that are key to securing long-term economic growth for the UK.

A port in Hamburg. Britain must cut back on its import addiction, according to a new report from the Work Foundation. Photograph: Getty Images

Spencer Thompson is economic analyst at IPPR

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How Tony Blair's disingenuous line on Iraq eroded our faith in politicians

Not the Chilcot Report by Peter Oborne reveals how Blair exagerrated evidence from the intelligence services to parliament – and the public.

In this incisive book, Peter Oborne calls the invasion of Iraq “the defining calamity of the post-Cold War era” and I am inclined to agree. Not long after the March 2003 attack, I interviewed Adnan Pachachi, a former foreign minister and UN ambassador for Iraq. He told me that he had visited President George W Bush in Washington a few weeks before the invasion and begged him not to go ahead with it. The overthrow of Saddam Hussein would, Pachachi warned, lead inevitably to civil war between Iraq’s two main religious groupings, the Sunnis and the Shias. Bush was shocked. According to Pachachi, he had no idea that any such division among Muslims existed.

Granted, Bush was an ignoramus – but you would have thought that someone might have explained this crucial fact to him. Pachachi turned out to be right. Iraq has fallen into a disastrous religious civil war as a direct result of the invasion and Isis, a more extreme force even than al-Qaeda, has come to the fore. Nearly 5,000 coalition soldiers died; many hundreds of thousands of Iraqi civilians, perhaps a million, have lost their lives; and the man who led the whole terrible business didn’t know that the danger even existed.

Pachachi, like many politicians across the Middle East, found this puzzling. The US had never understood the Middle East, he said, but the British did; so why hadn’t Tony Blair warned the Americans what was going to happen? We know the answer to that: although Blair was far cleverer than Bush and had better advisers, his approach was always a subservient one. Like the entire British establishment, he believed that Britain’s influence in the world depended on sticking close to the US and he was prepared to be led around on a leash because he knew that this was the only relationship Bush’s people understood or wanted from him.

To “stand shoulder to shoulder” with Bush – at least, to stand closer behind him, head bowed, than any other national leader – Blair had to persuade the British people that Saddam posed a threat to them. Oborne, in fine forensic form, demolishes (his word) the notion that Blair was simply repeating what the intelligence services had told him about Saddam’s weapons and capability; he shows that Blair exaggerated and misrepresented the intelligence he was given.

Lord Butler, the former cabinet secretary who had investigated the government’s pre-invasion use of intelligence, said the same thing in a speech in the House of Lords in 2007. He described Blair’s approach as “disingenuous”: mandarin-speak for dishonest. Oborne quotes Butler at length:

 

The United Kingdom intelligence community told him [Blair] on 23 August 2002 that, “We . . . know little about Iraq’s chemical and biological weapons work since late 1988.” The prime minister did not tell us that. Indeed, he told parliament only just over a month later that the picture painted by our intelligence services was “extensive, detailed and authoritative”.

 

Oborne’s central point is that this dishonesty has done serious damage to the fundamental trust that the British people used to have in their rulers. There are all sorts of reasons why people have lost faith in politicians but it was the charismatic Blair – along with his head of communications, Alastair Campbell – who let us down the most.

Campbell is a former journalist who, even when he was the political editor of the Daily Mirror, seemed far more concerned with pushing a party line than with trying to report things truthfully. In May 2003, the BBC journalist Andrew Gilligan accused him of “sexing up” the dossier on Saddam’s weapons of mass destruction. Campbell was irate. In July, Dr David Kelly, the Ministry of Defence weapons expert who had briefed Gilligan, committed suicide. If, indeed, it was suicide – once you start losing faith in the ­official version of things, there is no end to it. And that is Oborne’s point.

Kelly’s death was followed by the scandalous Hutton inquiry, which managed to deflect attention from the questionable nature of the dossier to the way in which Gilligan had reported on it. However, although Kelly wasn’t a sufficiently senior source for Gilligan to base his report on, there is no doubt that Gilligan was essentially right: the intelligence dossier had been grossly hyped up. Campbell’s frenzied efforts to protect himself and Blair did huge damage to the BBC, the judiciary, the intelligence and security agencies and public trust in government.

Oborne’s excellent book is clear-headed and furious in its condemnation of Blair. But what about the Chilcot report, when it appears on 6 July? The ludicrous delay in publishing it has given people the expectation that it, too, will be a whitewash. Yet we are starting to get leaks that it won’t be – that it will be just as savage as Oborne would like. That is the only way we can start to drain the poison that has built up in our national life since Blair took the calamitous decision to follow the US into invading a country that its president knew zip about.

John Simpson (@JohnSimpsonNews) is the world affairs editor of the BBC

Not the Chilcot Report by Peter Oborne is published by Head of Zeus (208pp, £10)

John Simpson is World Affairs Editor of BBC News, having worked for the corporation since the beginning of his career in 1970. He has reported from more than 120 countries, including 30 war zones, and interviewed many world leaders.

This article first appeared in the 26 May 2016 issue of the New Statesman, The Brexit odd squad