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We are in the middle of a severe recession, but this Report is an optimistic one. Here are a few of the most recent statistics about the United Kingdom's underlying strengths that deserve to be better known:
- In 2008, it was the world's second largest exporter of services;
- In 2008, it was the world's sixth largest manufacturing nation;
- In 2007, it was the eighth largest exporter of manufactured goods; and
- In 2006, 25% of those goods were high-tech.
Some readers will know all this, but to too many people these facts will be unfamiliar. As a nation, we are good at self-criticism. Of course it is important that we identify our weaknesses, and take action to correct them. However, failing to know and assert our strengths can also be disastrous. If, as some reporting suggests, Britain genuinely and wrongly believes itself a nation in which manufacturing is in decline, there is no high technology industry, and the scale of the service sector is a weakness rather than strength, then we will deter potential partners—from foreign investors to the young people in our schools—from participating in some extraordinarily successful businesses. That would help make sure that long-term economic decline becomes a self-fulfilling prophecy.
The United Kingdom is facing severe and real challenges. The country has been hit hard by the recent recession. Increasing globalisation means that we cannot compete on price alone. If the economy is to have a future, it must be in higher value-added goods and services, and it must be an economy which competes on innovation, skills and knowledge. We have been doing so as a nation at least since the days of the Industrial Revolution and there is no reason why we cannot continue doing so in the future.
However, there is a great deal to be done to make sure that the United Kingdom can compete successfully. To its credit, the Government has said a lot about the policies required to ensure a higher value-added economy can flourish. Recently, it has published at least five significant policy papers. But a higher value-added economy cannot be built by central government alone; regional bodies, local government, academia, the third sector and, above all, businesses of all sizes must also play their part. The challenge now is to make sure that broad policy statements are translated into action.
The Committee's inquiry is based on an extensive programme of visits in the United Kingdom and the USA, as well as oral evidence sessions from some distinguished individuals and organisations. We heard repeatedly of the underlying importance of six key factors in fostering a higher value-added economy:
Skills: the successful centres we saw built on the intellectual capital around them.
Ideas: the areas we visited had centres of research excellence and many organisations dedicated to ensuring ideas could be successfully commercialised.
Networks: ultimately, success owed a great deal to the fact that different parts of the system were connected to one another. Universities and technology transfer organisations collaborated; venture capitalists had links to universities and to local government.
Finance: there was ready access to risk capital, and encouragement and help for would-be entrepreneurs.
Leadership: this could come from business, from academia, or from the relevant part of government. Often, a variety of organisations worked together, or complemented one another.
Culture: it was taken as read that good ideas should be commercialised and accepted that not every initiative or business would succeed—indeed frequent failure was seen as part of the price of success.
Where the United Kingdom is succeeding, it already has the sources for ideas, skills and leadership in place. There are already world class collaborations between research institutions and industry, and action is being taken to widen such networks and increase their number. Where the UK economy is not reaching its true potential, these six ingredients are not in place.
Our Report looks at areas where more could be done to foster higher value-added activities, and makes a number of specific and more general recommendations.
However, in our view, the most urgent change is one of culture, and that will be the hardest to bring about. Collectively, we need to identify our strengths, publicise them and build upon them. We also need to accept that the innovation and experimentation the higher value-added economy requires will mean that projects sometimes fail, and that, in the long term, there is no reward without risk. If the United Kingdom has a culture in which appropriate risk taking, whether by entrepreneurs or by public servants, is discouraged, it will soon be overtaken by other more dynamic economies. We should start by recognizing that we already have a higher value-added economy; the challenges are to sustain it and to broaden that success to other sectors. This Report identifies ways in which that can be achieved.
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