The global economy may well take much longer to recover fully from the shock caused by the coronavirus crisis than many initially expected – and hoped. With business closures and lockdowns forecast to throw the world into the deepest recession since the 1930s Great Depression, we have teamed up with Civitas to outline a new vision for the UK economy post-Covid-19 – one which puts the revival of our manufacturing industry right at the very heart.
Following on from our first report published in May 2020 – Manufacturing a Recovery from Coronavirus – our founder John Mills sets out why as a result of unwise policy decisions taken over a long period, the UK economy will be poorly positioned to recover from the Covid-19 pandemic. Our economy is unbalanced and the underlying growth rate is low. The proportion of our GDP which we invest in the future is far below the world average and what money we do spend is not on the right projects. We have deindustrialised to a greater extent than any other advanced economy, with dire consequences for regional balance, good steady job prospects, increases in productivity and our ability to pay our way in the world.
The root cause of our problems is over-reliance on services at the expense of manufacturing.
For many years we have run our economy with a relatively high exchange rate which suits the City and our service economy but too strong a pound has been lethal for siting manufacturing facilities in the UK. It has made it impossible to invest sufficiently in the categories of investment which really drive productivity, particularly mechanisation, technology and power.
To achieve a successful recovery from the pandemic, we desperately need a stronger industrial base both to rebalance our economy and to enable us – without decimating most people’s disposable incomes – both to recover from Covid-19 and to pay for the mounting costs of climate change, health and social care, pensions and training. Without a much stronger manufacturing base, we run a major risk that UK living standards will be lower in 2030 than they were in 2019 or even 2007. The real choice we now have in front of us is between export- and investment-led growth or import- and debt-led stagnation.