CBI Says Free Market Left UK With ‘Branch Economy’

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The CBI will tell ministers today that the race to the top cannot be left to the free market, with regions suffering from decades of “benign neglect” which has left the country with a “branch economy” where too many businesses are centered in London and the South East.

Speaking in Port of Tyne at the start of the corporate group’s three-day annual conference, CBI Managing Director Tony Danker will argue that the UK now has a ‘coup de redemption’ if the jobs of high quality were needed to move the economy towards net zero are created in the old industrial centers.

“Just saying that the market will solve this problem is not enough,” Danker will say. “There are liberals in the debate who say government should never take an active role like this. But I don’t know of a country in the world – including, and especially, the United States – where governments are not active in economic geography.

Boris Johnson’s administration has been criticized by companies for a lack of clear direction after the UK’s exit from the EU and in the transition to a greener economy. The Chancellor has delayed the revision of corporate tariffs and national insurance taxes have been raised to pay for health care, raising the cost of labor. One of the first decisions taken by Business Secretary Kwasi Kwarteng was to abolish the Industrial Strategy Council, established in 2018 as an internal think tank to advise on regeneration of regions.

CBI speaks on behalf of 190,000 companies, which alone employ 7 million people, or about a third of the private sector workforce. Under the theme of leveling up, his conference will be held for the first time in several places. The hybrid event will be broadcast live, with sessions held in front of an audience of business leaders in locations such as Birmingham, Yeovil and Swansea.

Danker calls for a partnership, saying neither government nor business can solve the leveling on their own.

« Since the 1980s we have let old industries die – offering little more than benign neglect for what has been left behind. It was an ambivalent economic policy on the race to the bottom, ”he said.

With the arrival of new industries such as biotechnology, space travel and cybersecurity, it is now possible to create wealth in the regions, he will add. The CBI wants the old industrial centers to play a role in the transition to a less polluting economy, with poles of activity in hydrogen – which could replace gas as a domestic fuel – offshore wind and carbon capture.

Danker will highlight South Wales, which is emerging as a player in the manufacture of certain types of computer chips.

He will warn that business investment is an “Achilles heel”, undernourished since the 1990s and on the way to falling even lower after the pandemic.

“The truth is that in too many sectors the UK now feels like a branch economy,” he will say, “with the most productive parts of a sector, like head offices, too often based in London and the South East, and branch managers and back office based everywhere else.

CBI will today announce the creation of a new commission, the Center for Thriving Regions, which will serve as a vehicle for the private sector to encourage the creation of industrial activity clusters. The center will launch two pilot demonstrations and will be made up of all countries and regions of the UK by local, national and multinational companies and universities or colleges.

Danker called on companies to get involved in the regions strategy alongside mayors and central government, making decisions on new investments in universities, airports or logistics centers.

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