Is UK Plc Going Bust?

Mark Siara - Mon 21 Jan, 2008

Why is it you never hear the phrase UK plc anymore? This concept was much trumpeted in the Blair years, but has fallen out of favour recently. Is it because the slogan itself is somehow wrong? UK plc. Sounds a bit like those old Double Diamond adverts RU 4 A DD OK? Maybe the use of TLAs (Three Letter Acronyms) is on the way out; they have been overused in recent times: CDS, MBS, CDO, SIVsthey dont exactly fill your heart with joy...

UK plc OK?

Why is it you never hear the phrase UK plc anymore? This concept was much trumpeted in the Blair years, but has fallen out of favour recently. Is it because the slogan itself is somehow wrong? UK plc. Sounds a bit like those old Double Diamond adverts – RU 4 A DD OK? Maybe the use of TLA’s (Three Letter Acronyms) is on the way out; they have been overused in recent times: CDS, MBS, CDO, SIV’s…they don’t exactly fill your heart with joy.

And really that’s a bit of a shame. The idea that the country should be run like a business, rather than like a billionaire’s football club, is one that’s long overdue. The structure is already in place: there’s the Chief Executive Officer (Prime Minister), the Chief Operating Officer (Deputy PM), the Chief Financial Officer (Chancellor), Board Members (the Cabinet) and the Shareholders (voters). So, could it work? Unfortunately the answer is no - UK plc has made a fatal error, one that is all too common in the real world: over-reliance on one product.

As a country we are a one-trick pony. The small horse in question is the Financial Services Sector. "What’s wrong with that?" Comes the cry from the City. We’re a British success story. London is a major world financial centre full of world-class businesses which provide a much needed boost to the country’s balance of payment account. All of which is true, but that misses the point. As a country, we have little else to offer.

Look at Germany, Japan, and China. Countries with a diverse economic base where they make things, grow things or dig things out of the ground, rather than just move money around. In the UK we have call centres and the “knowledge-based economy”, whatever that is. If the economy looks a little flat, just cut interest rates and let the British consumer take up the slack. Simple. Simple yes, to the point of imbecility. And a succession of UK plc CEO’s are to blame for decimating many of Britain’s once-viable sectors, either through a lack of support or deliberate destruction.

Take manufacturing. Only a few short years ago, this country made significant quantities of railways, chemicals, cars, ships, and motorcycles and exported them to the rest of the world. Not any more. Try and think of a modern world-class British manufacturer. Not easy is it. For those who said Dyson - well done, but remember that they relocated their production abroad. Rolls-Royce fits the bill – not the car people (now owned by Volkswagen), but the Derby-based aero-engine maker. But all the rest have gone to the wall or exist on a vastly reduced scale.

So what? If inefficient British companies can’t compete with their leaner, more efficient overseas rivals, then they deserve to go to the wall. I don’t remember that cry when the government bailed-out Northern Rock but that’s in the financial sector, remember. For stand-alone manufacturing often the playing field is not level. Subsidies and import tariffs help to keep many loss-making foreign companies afloat, giving them the chance to turn things around, see off the competition and provide much needed diverse employment to boot. These overseas businesses have been thought of as an investment for the future. But that implies long-term thinking, something UK plc is not very good at.

The big advantage of manufacturing is its ability to provide employment for all sections of society. A large manufacturing company such as Rolls-Royce or BAE Systems (formerly British Aerospace – the name change apparently reflects the global nature of the defence industry) will employ academics, managers, professionals, artisans, semi-skilled and non-skilled workers in a whole host of departments: Research & Development, Finance, Design, Production, Administration and Ancillary functions are all represented. Diverse employment for all sections of society.

The other benefit is that manufacturing is not concentrated in one corner of the country. People can and do (did) make all sorts of products in the provinces: cars in the Midlands, ships in Northern Ireland and on Teesside and Tyneside, aeroplanes in Bristol and Lancashire and, not forgetting, steel in Sheffield.

Other sectors too are (were) in the regions. Mining for coal and tin in Wales, Yorkshire and Cornwall. Farming in Kent, Shropshire, Cumbria and Devon. Forestry in Scotland. All these areas have been downgraded in terms of their importance to the UK economy. To UK plc. But why? In part it is down to their location as we become more London-centric.

Concentrating so much of the economic and political influence in one place is unhealthy and it is not necessary. Germany has Berlin and Frankfurt, the US has Washington and New York, Australia has Canberra and Sydney. We have Westminster and the City. London both, and that is why London has been largely unaffected by the structural changes that have wreaked havoc on other large parts of the UK economy over the last thirty years. For all the weasel words of the politicians, nothing has been done. Before Labour returned to power Gordon Brown gave a speech highlighting the importance of UK manufacturing. But then he was elected and gave us cheap money instead.

But there is a sense now that the wheel (made in Taiwan) is turning. The credit crunch has paralysed the British financial services industry. Bonuses are down, so there’s less money to trickle into the housing and retail sectors. Conversely there’s a renaissance in other areas. Tin and tungsten mines are due to reopen in Cornwall, and there’s coal being dug again in South Wales. In addition, rising food prices are helping to revive the agricultural sector and the weakening pound is helping export-led manufacturers.

The hope is that these sectors can flourish enough to offset the reduction in growth elsewhere, and that this and future governments learn not to put all their economic eggs in the service and retail basket. The fear is that years of under investment and political intransigence have resulted in a severely weakened economy - one that is ill-prepared to deal with any downturn. To use the analogy one more time, if the UK was a company it would currently be AIM-listed, whereas, with some key investment, it could return to the FTSE 100.