A Survey of the UK Economy, Business

and Trade: PART 2

1. INTERNATIONAL COMPARISONS:
CHARACTERISTICS OF THE BRITISH ECONOMY
COMPARED TO OTHER ADVANCED COUNTRIES
BASED ON AN ONS SURVEY

Frequent critiques – are they justified?

1. We don’t make anything anymore
- UK no different from most other industrialised
countries
- In only Germany and Canada do services account
for -70% of the economy
2. The UK’s manufacturing industry output
has declined at the fastest pace of all G7
economies

• Decline in manufacturing in most

advanced nations but
• UK – very rapid decline
• UK and France – lowest manufacturing
share of GDP
3. Britain’s financial services sector has grown
rapidly and the UK has become overly reliant
on the City
• Financial services = 7% GDP
• Financial services = largest service product
exported by UK businesses
• Biggest share of financial services exports in
G7 (30% of total service exports)
• 50% of the financial services output is
generated in London
4. We are overly reliant on consumer
spending

• Higher than most other G7 nations

but lower than in the US
 2. THE UK ECONOMY IN 2019
Figures for economic growth
• The rate of economic growth has
decreased since the EU referendum
• Annual growth rate is the lowest for
a decade.
• + 0.3% in the last quarter
• Annual rate forecast at 1.4% for 2019
Employment levels
• Low unemployment – strength of the UK
economy (3.8%)

How can we explain this?

- Wages cut or frozen during recesion
- Weakest decade of wage growth for 200 years
→ more people are working and for longer
hours
→ 1 in 10 workers would like to work longer
hours
 Will the UK be worse off after
Brexit?
• No detailed impact assessment

• The deal is « self-evidently in our

economic interest » (Sajid Javid,
Chancellor of the Exchequer)
According to the NIESR think tank:
Johnson’s deal
→ remove uncertainty
→ bring back some investment
BUT
→ lose 4% of growth
→ more distant relationship with EU
→ lower levels of migration
→ New FTAs cannot compensate for
decrease in trade with EU
 NIESR’s analysis continued…
• May’s deal
→ lose 3%

• Any type of Brexit

→ negative for the UK economy
 3. The General Election 2019:
What are the other challenges for the
UK economy?
(info from Paul Johnson’s article in The Guardian, 8 Nov 2019

• Fewer young people own homes in

comparison to older generations

• Wages are 20% lower than if the UK had not

experienced the economic crisis

• The problem of the « working poor »

• An ageing population
More investment needed on health and
social care (raise taxes or cut spending in
other areas)

• « Going for Zero »

All main parties aim at zero carbon
emissions by 2050 (Green Party by 2030)
but radical changes necessary
What will the next government mean
for the world of business?

• Is there still a neo-liberal consensus

across the political spectrum?

• CBI conference November 2019 –

main parties presented their plans
for business 
Boris Johnson
Corporation tax
• No reduction in corporate tax from 19%
to 17%
• Money saved would be used for the NHS

Brexit
Withdrawal deal would provide
« certainty »
Jeremy Corbyn (Labour Leader)

• Radical programme of public ownership

of utilities (water, rail…)
« genuinely mixed economy »

• Nationalize broadband and make it free

for across the country
« It is sometimes claimed that I am anti-
business. This is nonsense. It is not anti-business
to be against poverty pay. It is not anti-business
to say the largest corporations should pay their
taxes…It is not anti-business to want prosperity
in every part of the country. »

Jeremy Corbyn, speech to the CBI, November

2019
Corbyn on Corporation Tax
• Raise it to 26%

Corbyn on Brexit
• Re-negotiate a deal (customs union,
single market) and hold a 2nd
referendum
Jo Swinson (Leader of the Liberal
Democrats)

Lib Dems are the « natural party of

business » because they want to
cancel Brexit
The Party Manifestos, Election
2019
Conservative
“We will get Brexit done in January and unleash
the potential of our whole country” (Johnson)

• Brexit – pass withdrawal agreement in

Parliament and leave the EU by end of
January 2020
• Negotiate trade agreement with EU by end of
2021, no extension.
• Immigration
Australian-style points based system

Most will need to have a job before coming

Reduce n° of lower-skilled immigrants

NHS visa to fast track entry for health

professionals

Active recruitment of leaders in science and

technology
• Business, the economy and skills
Cut the burden of tax on business by reducing
business rates.
Increase employment allowance to make
recruitment easier

Red Tape Challenge

Stricter on tax evasion and digital services tax

New National Skills Fund worth £3bn

More high-quality childcare before and after school

and during the holidays
Reaction from business leaders
• Welcomed overall pro-business vision
(training, skills…)

• Fear about risk of no deal Brexit

« When it comes to Brexit, business will only feel
it is « done » when they know the terms of the
new relationship with the EU, not before »

(Edwin Morgan, Director of the Institute of Directors)

“Businesses still need much more clarity on
... HS2, how the UK’s future immigration
system will work in practice.

There’s a big difference between ‘getting

Brexit done’ and doing it right.
Categorically rejecting the possibility of a
longer transition period is a real concern,
because it means businesses could face yet
another damaging cliff-edge at the end of
2020”.
Dr. Adam Marshall, British Chamber of Commerce
“Sustainable economic growth will be risked if
there is a needless rush for a bare bones Brexit
deal that would slow down our domestic
progress for a generation. On Brexit, firms need
the certainty of a closely aligned, frictionless
relationship with the EU.”

Josh Hardie, deputy director-general of the CBI

The Labour Party Manifesto
Brexit
• New deal with the EU
« a comprehensive UK-wide customs
arrangement »
« close alignment with the single
market »
« dynamic alignment on workers’
rights »
Immigration
Labour recognises benefits of free
movement

• REMAIN scenario – continue free

movement

• LEAVE scenario –immigration would be

part of a deal
Economy, business and employment
• Same taxes on profits made from shares as on
salaries
• Better pay for all (£10 minimum wage for all)
• Fewer precarious jobs
• Shorter working hours
• « Inclusive ownership funds » → shares for
employees
• More workers on company boards
• Strict rules on carbon emissions for businesses
 Reaction of the world of business to
Labour’s proposals
• Tax rises (corporation and income tax)
attacked by business groups

• Too much state intervention→ stifle

innovation and growth

Carolyn Fairburn welcomed ambitions on a

« close trading relationship with Europe »….
BUT
Adam Marshall (British Chamber of Commerce)
warned
« Command and control isn’t the way »

• Cost of nationalisation projects?

• Future deficit under Labour would breach EU

law
4. « Capitalism: Time for a Reset »
Has there been a re-think on
capitalism?
• Channel 4 report (November 2019)
« What is happening to modern capitalism »?

- Business figures, not just the far-left are

questioning the functioning of the capitalist
model
- Are benefits being distributed to all?
- Businesses and social responsibility
 « Capitalism: Time for a Reset.
Businesses must make a profit but should
serve a purpose too. »
(Headline in the Financial Times, September 2019
• FT’s editor – businesses need to « do things
better »
• Jim O’ Neil – (ex-banker) – the business model
needs to be changed, the model needs
« urgent repair »
 Taken from the FT website, a message
from the editor, Lionel Barber
“ The liberal capitalist model has delivered peace,
prosperity and technological progress for the past 50
years, dramatically reducing poverty and raising living
standards throughout the world.
But, in the decade since the global financial crisis, the
model has come under strain, particularly the focus on
maximising profits and shareholder value. These
principles of good business are necessary but not
sufficient.
The long-term health of free enterprise capitalism will
depend on delivering profit with purpose.
(…) It is time for a reset.
 « Are Voters ready for Britain’s
economy to be re-wired? »
The Guardian

YouGov Poll
60% in favour of moderate or radical
change
60% support increased funding to limit
climate change
Most believe economy is run for the
benefit of companies
« The public – including many Conservative
voters – do not like the way in which the
economy seems to benefit mainly the
wealthy and big business, and they support
a wide range of significant reform
policies. »

Michael Jacobs, Professor of Political Economy,

University of Sheffield
 5. Business Culture in the UK
A global centre for international business,
finance, law and higher education
• Challenges
- Post-Brexit Britain?
- Free trade deal with the EU?
- New partnerships?
- Future for the City?
Background to business in the UK
• Restructuring of the economy (heavy
industry to services)
changes in management style and
company structure (flatter, less hierarchical,
less bureaucratic, blurred boundaries)

• Jobs for life → change jobs, careers

• Generalisation over specialization

 British business structures
• Board of Directors, led by CEO

• All PLCs have 2 directors accountable

to the shareholders

• Large companies have non-executive

directors (outside, impartial experts)