London, UK – Today, the Chancellor of the Exchequer delivered his 2021 Spring Budget. As part of the Budget, it was announced that the British economy shrank by 10% in 2020 with over 700,000 people losing their jobs since the pandemic began in March.
Our Founder, John Mills, responded:
"While the measures set out in today’s Budget to support the economy through the recovery from COVID-19 are welcomed, there is little to give us hope that the economy is going to grow faster in future than the very slow rate achieved before the pandemic started.
"Generous investment allowances on their own will not be sufficient to remedy the UK’s lamentably low rate of investment as a percentage of our GDP. At barely 17%, it is about a third lower than the world average of 25% and still further away from the 30%+ common along the Pacific Rim. Nor is there sufficiently strong encouragement in the Budget for the types of investment with the highest rates of return – clustering round mechanisation, technology and power – which are the real drivers of productivity growth.
"The fundamental problem is that it costs more to produce almost anything in the UK than it does elsewhere and this is very largely an exchange rate problem. Instead of addressing these key issues, however, the Government has presided over sterling strengthening by about 10% over the last six months, enough to discourage anyone from siting new production facilities in the UK if they have to pay their way in the highly competitive international market for manufactured goods.
"The risk then is that, without the productivity growth which only a manufacturing revival can produce, very slow growth leaves average disposable incomes no higher in 2030 than they were is 2019 or even 2007 – a disastrous prospect from every perspective – socially, politically, economically and internationally."