Recently at lunch in my constituency, I found myself seated next to a native partner from one of the two Chinese law firms now operating in London. During our conversation I made some passing reference to the ‘global economic downturn’. This was greeted with a wry smile. ‘Back home’, he said, ‘we call it the North Atlantic recession’.
What we so easily forget amidst the West’s doom and gloom – where the Euro teeters, the United States drifts and the OBR’s predictions of sub-optimal UK growth are widely considered optimistic – is that across much of Asia, Australasia, South America and Africa, economies are growing at a steady pace.
Thank goodness. For where there is growth, there is opportunity.
Unlike the 1930s when the global economy was shrinking, here in 2011 economic growth worldwide is likely to exceed 4%. Yet aside from a few vague nods to the desire to increase our exports, we still lack any overall strategic vision and message about the UK’s role in the new world that unfolds before us now with frightening rapidity.
I appreciate that in the face of colossal economic difficulties, it sounds almost naïve to talk with wide-eyed optimism. But all too often the political class seems to be in the business of managing decline rather than looking through the darkness at what Britain has the potential to become.
The OBR’s figures suggest that some elements of our economy have contracted permanently. Over the past decade and a half, roughly three-fifths of domestic expansion in the economy has arisen courtesy of either financial services, the public sector or in the property/construction field. These are three activities in which the present squeeze will be most profound (notwithstanding the recent announcement to provide an adrenalin rush to the first-time buyer housing market), especially as these areas have been largely funded by borrowing.
Discounting these key drivers of the last boom, it is understandably difficult to predict with any confidence the precise type of economic activity in which the necessary super-charged levels of growth can be achieved in future. Lip service is paid to boosting traditional manufacturing, where we face enormously fierce competition. But what is our strategy when it comes to an area in which we continue to maintain a distinct reputation and competitive advantage – the export of intellectual property?
Let me take a seemingly small example. Both the last government and the coalition have pinpointed the creative industries as a sector that offers the prospect of future growth. Yet for the two years that I have been trying, as Patron of Animation UK, to negotiate a tax credit for the animation industry, I have come up against a brick wall. The televised animation sector may appear only a small slice of the national economic cake but almost every other nation with an animation industry deem the rewards of government subsidy well worth the initial outlay. As such, British animators are losing work from these shores at an alarming rate because they cannot compete with the lure of government-backed incentives which make it so much easier to put together the necessary funding packages for programme-making elsewhere. (Click here to read more about this campaign).
Over the past two years the Treasury has been intransigent, seeing only the upfront cost rather than the longer term, revenue-positive outlook. Most critically of all, it ignores the key reason why, as a believer in free and open markets, I am supportive of a targeted tax credit. Naturally it would be good if a tax credit helped keep animation jobs on these shores but the real golden egg is the retention in this country of intellectual property rights. The money generated annually worldwide from unimaginably successful franchises such as Thomas the Tank Engine, Wallace & Gromit and Peppa Pig – especially when it comes to secondary branded products – massively exceeds the money brought in by, for example, films like the King’s Speech which was helped along by the film tax credit. To give some perspective, Thomas the ‘Bank’ Engine tots up worldwide sales in excess of £1 billion every year, with his tales broadcast to more than a billion households in 185 countries each and every week. The King’s Speech, hailed as the most successful independent British film ever, grossed just shy of £374m.
Instead of tinkering with little pots of money here and there temporarily to boost shrinking sectors, it is time we started thinking strategically about how we can promote, not only via the tax system, the sectors of our economy that actually have potential future growth. The market for much of our creative industry output are those territories which are growing fast – well outside the area of our North Atlantic downturn.
Oh, and one last thing – if we are properly to exploit those Chinese, Indian and South American connections, we urgently need to commit ourselves to one more piece of infrastructure improvement. An airport for London fit for the 21st century (click here) is something that has had its supporters even before Boris became Mayor!