What's the commercial driver of the UK economy going to be if it's not financial services?

What's the commercial driver of the economy going to be if it's not financial services?

This is no time for modesty," wrote Lord Davies, the trade minister in The Daily Telegraph on Monday in a call for us Brits to start telling the world that we're great.

By Richard Tyler
Last Updated: 9:44AM BST 26 May 2009

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But what are we great at? The City has been demonised; large scale manufacturing is on its knees. Davies insists: "It's time for change in the way that we perceive ourselves and how we talk about the economy."

But change our perception to what? If financial services are no longer going to rule the roost as the economy is "rebalanced" (somehow) and we are all going to live in a Gordon Brown's new world order of allotment capitalism (he prefers "sustainable capitalism"), exactly what commercial activity is going to drive the economy out of recession and back to long term trend growth rates?

Large chunks of the New Forest are being sacrificed as industry and the Government examine this issue. Some of the studies' findings are intriguing. The report team led by former Ford chief technology officer Richard Parry-Jones set out the automotive industry's 20-year vision for vehicle-making in the UK earlier this month.

They compared Britain's position relative to our economic competitors and concluded that "the UK still has a competitive, yet fragile, automotive industry". Britain is reliant on foreign investment – the car industry in Britain is now largely Japanese – and the report concludes that "there is no natural choice to do the work in the UK".

There is also no natural choice for those car makers that are here to source components from British suppliers. Industry bosses said that UK sourcing was likely to decline further over the next five years, making suppliers less competitive to the point where the manufacturers decide they need to more abroad.

It is trends like this that can make you pessimistic about Britain's prospects. Ministers talk up the low carbon economy and promise to use public money to fund trials of the next generation of electric cars. But the chances of them being mass produced in Britain are slim.

Most depressing is the fact that the issues facing the industry identified in this report are exactly the same ones identified by previous studies commissioned by successive governments since 1975. They include currency fluctuations, exchange rates and the need for better skills and training.

"One also has to see this as a failure to address sufficiently these issues in the past, given that they are mentioned repeatedly by industry leaders," thunders the report.

This sense of lack of direction from Whitehall is echoed in the other industry reports being published. An assessment of the UK's ability to build an industrial biotechnology sector, which could produce energy, chemicals and materials from renewable resources, concluded that the country has the scientific know-how but, to quote from the report: "Unlike other countries (in particular USA and Germany), no policies are currently in place to support the bio-based materials and chemicals sector."

Cue Lord Mandelson, the Business Secretary, and his "industrial activism" strategy that, he insists, will see the Government listen and act.

This will not involve the Government returning to the discredited practices of the 1960s and 1970s of picking industrial winners, he says. The Government will simply identify industries in which Britain is and/or could become a world leader and then enable them to prosper.

So it seems the Government is finally offering what industry wants: a clear, coherent framework of support. But doubts remain. How are Whitehall officials going to pick which industries should be helped? The automotive industry seems to have a case. But then so does aerospace; composite materials; plastic electronics; life sciences and pharmaceuticals; information technology; renewable energy; professional services and engineering construction.

Another Lord, Lord Drayson, the science minister, told me that the Government has to decide which industries it will support by the end of this year at the latest. The clock is ticking. Commissioning reports is one thing. Picking the right new technology to back is quite another. Last time, the Whitehall mandarins tried they failed. Wouldn't it be better to learn to love the City again.

http://www.telegraph.co.uk/finance/yourbusiness/5383517/Whats-the-commercial-driver-of-the-economy-going-to-be-if-its-not-financial-services.html