Building the businesses of the future

The real issue for Britain is our long-term competitiveness.

Today's Autumn Statement, as I argued last week on Conservative Home, needed to be a bold one. Worrying figures from the OECD and OBR this week have further exposed that Britain is walking an economic tightrope, from which any deviation could cost the Government its hard won credibility with the financial markets. Against this backdrop, the Chancellor's Statement needed to boost confidence, to encourage businesses to invest and reassure families that there is light at the end of the tunnel. Much of the political commentary, which I am sure will run for years to come, will focus on whether these proposals constitute part of Plan A, A+, B or any other letter of the alphabet. But the long term test of the Government's strategy will be whether or not it boosts our international competitiveness against the likes of the BRIC's (Brazil, Russia, India & China), on whom ironically we will also depend for our growth. Indeed, it is only by being competitive that Britain can maintain decent public services.

At present, 40 per cent of our exports go to Eurozone countries. But a decade of slow growth in Europe might change this, and it is the consumers and savers in some of those countries we have hitherto seen as developing that will be critical to our prosperity. Jim O'Neill, in his recent book The Growth Map, has noted that personal consumption in China has risen $1.5 trillion in the last decade, the equivalent of creating another UK within China's borders. Creating the environment for UK companies to export to these countries is imperative. And as I wrote yesterday, attracting cash-rich institutions like the China Investment Corporation to invest, and help build Britain's infrastructure for the future, is vital. Investor and businesses rely upon confidence, and that is what the Autumn Statement has achieved.

To compete in the long term, Britain needs to be a place where entrepreneurs and the spirit of adventure can flourish. This cannot be done by the Government picking winners and supporting them, but relies on people with new ideas choosing to launch companies in the UK. Creating the right environment for entrepreneurs today will allow Britain to incubate the start-ups that will be the Google and Facebook of tomorrow. That is why I am pleased that the Treasury has looked at the raft of tax incentives that would encourage people to invest in innovative ideas. But tax is not enough and if there is one thing that has come out of the financial crisis, it is that banks do not always help. Supporting non-bank lenders through the Business Finance Partnership and looking at a the idea of a bond market, both of which I called for in the Beyond the Banks report co-authored with NESTA, should transform the finance landscape for these businesses.

None of this fits neatly into the political dividing lines around which most of the commentary will be focused, but in the long term it will decide whether or not we can compete internationally and pay our way.

Sam Gyimah is Conservative MP for East Surrey

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Former Irish premier John Bruton on Brexit: "Britain should pay for our border checks"

The former Taoiseach says Brexit has been interpreted as "a profoundly unfriendly act"

At Kapıkule, on the Turkish border with Bulgaria, the queue of lorries awaiting clearance to enter European Union territory can extend as long as 17km. Despite Turkey’s customs union for goods with the bloc, hauliers can spend up to 30 hours clearing a series of demanding administrative hoops. This is the nightmare keeping former Irish premier John Bruton up at night. Only this time, it's the post-Brexit border between Northern Ireland and the Republic, and it's much, much worse.   

Bruton (pictured below), Taoiseach between 1994 and 1997, is an ardent pro-European and was historically so sympathetic to Britain that, while in office, he was pilloried as "John Unionist" by his rivals. But he believes, should she continue her push for a hard Brexit, that Theresa May's promise for a “seamless, frictionless border” is unattainable. 

"A good example of the sort of thing that might arise is what’s happening on the Turkish-Bulgarian border," the former leader of Ireland's centre-right Fine Gael party told me. “The situation would be more severe in Ireland, because the UK proposes to leave the customs union as well."

The outlook for Ireland looks grim – and a world away from the dynamism of the Celtic Tiger days Bruton’s coalition government helped usher in. “There will be all sorts of problems," he said. "Separate permits for truck drivers operating across two jurisdictions, people having to pay for the right to use foreign roads, and a whole range of other issues.” 

Last week, an anti-Brexit protest on the border in Killeen, County Louth, saw mock customs checks bring traffic to a near standstill. But, so far, the discussion around what the future looks like for the 260 border crossings has focused predominantly on its potential effects on Ulster’s fragile peace. Last week Bruton’s successor as Taoiseach, Bertie Ahern, warned “any sort of physical border” would be “bad for the peace process”. 

Bruton does not disagree, and is concerned by what the UK’s withdrawal from the European Convention on Human Rights might mean for the Good Friday Agreement. But he believes the preoccupation with the legacy of violence has distracted British policymakers from the potentially devastating economic impact of Brexit. “I don’t believe that any serious thought was given to the wider impact on the economy of the two islands as a whole," he said. 

The collapse in the pound has already hit Irish exporters, for whom British sales are worth £15bn. Businesses that work across the border could yet face the crippling expense of duplicating their operations after the UK leaves the customs union and single market. This, he says, will “radically disturb” Ireland’s agriculture and food-processing industries – 55 per cent of whose products are sold to the UK. A transitional deal will "anaesthetise" people to the real impact, he says, but when it comes, it will be a more seismic change than many in London are expecting. He even believes it would be “logical” for the UK to cover the Irish government’s costs as it builds new infrastructure and employs new customs officials to deal with the new reality.

Despite his past support for Britain, the government's push for a hard Brexit has clearly tested Bruton's patience. “We’re attempting to unravel more than 40 years of joint work, joint rule-making, to create the largest multinational market in the world," he said. It is not just Bruton who is frustrated. The British decision to "tear that up", he said, "is regarded, particularly by people in Ireland, as a profoundly unfriendly act towards neighbours".

Nor does he think Leave campaigners, among them the former Northern Ireland secretary Theresa Villiers, gave due attention to the issue during the campaign. “The assurances that were given were of the nature of: ‘Well, it’ll be alright on the night!’," he said. "As if the Brexit advocates were in a position to give any assurances on that point.” 

Indeed, some of the more blimpish elements of the British right believe Ireland, wedded to its low corporate tax rates and east-west trade, would sooner follow its neighbour out of the EU than endure the disruption. Recent polling shows they are likely mistaken: some 80 per cent of Irish voters say they would vote to remain in an EU referendum.

Irexit remains a fringe cause and Bruton believes, post-Brexit, Dublin will have no choice but to align itself more closely with the EU27. “The UK is walking away,” he said. “This shift has been imposed upon us by our neighbour. Ireland will have to do the best it can: any EU without Britain is a more difficult EU for Ireland.” 

May, he says, has exacerbated those difficulties. Her appointment of her ally James Brokenshire as secretary of state for Northern Ireland was interpreted as a sign she understood the role’s strategic importance. But Bruton doubts Ireland has figured much in her biggest decisions on Brexit: “I don’t think serious thought was given to this before her conference speech, which insisted on immigration controls and on no jurisdiction for the European Court of Justice. Those two decisions essentially removed the possibility for Ireland and Britain to work together as part of the EEA or customs union – and were not even necessitated by the referendum decision.”

There are several avenues for Britain if it wants to avert the “voluntary injury” it looks set to inflict to Ireland’s economy and its own. One, which Bruton concedes is unlikely, is staying in the single market. He dismisses as “fanciful” the suggestions that Northern Ireland alone could negotiate European Economic Area membership, while a poll on Irish reunification is "only marginally" more likely. 

The other is a variation on the Remoaners’ favourite - a second referendum should Britain look set to crash out on World Trade Organisation terms without a satisfactory deal. “I don’t think a second referendum is going to be accepted by anybody at this stage. It is going to take a number of years,” he said. “I would like to see the negotiation proceed and for the European Union to keep the option of UK membership on 2015 terms on the table. It would be the best available alternative to an agreed outcome.” 

As things stand, however, Bruton is unambiguous. Brexit means the Northern Irish border will change for the worse. “That’s just inherent in the decision the UK electorate was invited to take, and took – or rather, the UK government took in interpreting the referendum.”