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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Is anyone prepared to solve the NHS funding crisis?

As long as the political taboo on raising taxes endures, the service will be in financial peril. 

It has long been clear that the NHS is in financial ill-health. But today's figures, conveniently delayed until after the Conservative conference, are still stunningly bad. The service ran a deficit of £930m between April and June (greater than the £820m recorded for the whole of the 2014/15 financial year) and is on course for a shortfall of at least £2bn this year - its worst position for a generation. 

Though often described as having been shielded from austerity, owing to its ring-fenced budget, the NHS is enduring the toughest spending settlement in its history. Since 1950, health spending has grown at an average annual rate of 4 per cent, but over the last parliament it rose by just 0.5 per cent. An ageing population, rising treatment costs and the social care crisis all mean that the NHS has to run merely to stand still. The Tories have pledged to provide £10bn more for the service but this still leaves £20bn of efficiency savings required. 

Speculation is now turning to whether George Osborne will provide an emergency injection of funds in the Autumn Statement on 25 November. But the long-term question is whether anyone is prepared to offer a sustainable solution to the crisis. Health experts argue that only a rise in general taxation (income tax, VAT, national insurance), patient charges or a hypothecated "health tax" will secure the future of a universal, high-quality service. But the political taboo against increasing taxes on all but the richest means no politician has ventured into this territory. Shadow health secretary Heidi Alexander has today called for the government to "find money urgently to get through the coming winter months". But the bigger question is whether, under Jeremy Corbyn, Labour is prepared to go beyond sticking-plaster solutions. 

George Eaton is political editor of the New Statesman.