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1 May 2014updated 09 Jun 2021 9:16am

How to build an innovation economy

Backing tech, thinking global and reducing the tax burden for entrepreneurs will make Britain an economic world-beater once more.

By George Freeman

The UK finds itself at a crossroads. With the economy now recovering strongly – as seen with buoyant GDP figures for Q1 on Tuesday – the dark days of the crisis might seem to be behind us. But as the Chancellor said in the Budget, we must face brute economic facts.

Though the view from the boardroom window on the top floor of UK plc may be sunnier, the continuing scale of the structural deficit effectively means there’s a fire in the basement. Despite very tough efficiency savings and cuts to rein in public spending, we are still running a serious deficit and accumulating debt. The rescue job is not yet complete.

Following the crisis, the key question of our time is how the UK can become the crucible of innovative approaches to public and private sector efficiency? I believe the only way we are going to get UK plc afloat again is through the power of innovation in both our public and private sectors to drive a new age of productivity and competitiveness.

First, we must continue to embrace the technological revolution to shake up existing markets. In tech, that means unleashing the power of the revolutions in IT and telecoms, digital media, genetics, data analytics and clean-tech solutions in energy, finding the twenty-first century’s equivalent of electricity or the invention of the internet, a new space race for the defining technologies of our age. As the Chancellor said in a landmark speech in Cambridge last week, it is about becoming the “best place to innovate”.

We then need to think about how we innovate in terms of selling our products and services. Fundamentally, we need to turn our focus from the sclerotic eurozone to emerging markets. The western European nations are all grappling with the same structural weaknesses – and a currency and banking system weighed down in bad debts. We cannot afford to sit and wait for the eurozone alone to drive growth. We have to go and trade with the faster emerging markets, the BRICs and N11.

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In my field of Life Sciences, for example, the emerging economies are driving vast new markets in food, medicine and energy. In food, we will have to double global food production with much less land, water and energy. In 30 years the exploding populations of these nations – who today need the basics of public health, nutrition and energy – will demand the modern biomedicines, Western foodstuffs and clean-tech that only their elites enjoy today. Far from giving up on emerging markets, such needs show why our exports are more sought after than ever.

To do that we need to make the UK the best place in the world to come and start a new business. That’s why for the last three years I’ve been advocating a “New Deal for New Business”: if you’re starting or growing a small business, employing people and generating sales turnover, government should get off your back. No employers’ National Insurance – a jobs tax. No VAT – a value tax. No regulations designed for big companies.

During the 15 years I worked in start-up venture capital, I was always struck by how many first-time entrepreneurs underestimated their turnover, and spent vast amounts of time and stress and accountants fees worrying about complying with government bureaucracy. Get off their backs and let them grow and we’ll find that they hit the threshold for tax that much quicker. Such a policy would be simple, clear and potentially revolutionary in its effect.

This Parliament has been about saving the UK from becoming another Greece. The next Parliament will be about making Britain an economic world-beater once more – investing, exporting and manufacturing more. Backing tech, thinking global and continuing reducing the tax burden for entrepreneurs are just three ways in which that can become a reality.

George Freeman is Chair of the 2020 Conservative Innovation Economy Commission, and a UK trade Envoy. This is an edited extract from ‘The Modernisers’ Manifesto’, published by Bright Blue