Positive outlook almost everywhere
The day kicked off with a deep dive into the global economic outlook. The Financial Times’ Martin Wolf begun the day on a cheery note – we are in the middle of a very strong global upswing. This isn’t brand new information – indeed we’ve seen UK manufacturers benefit from strengthening global demand in our recent surveys and in the official statistics.
Forecasters have been boosting their growth predictions for the world economy over the past year and 2018 looks set to be strongest outturn since 2011, according to the IMF. The outlook is not, however, risk free (when is it ever?); at the moment the top three are – more aggressive tightening of monetary policy around the world in response to higher than expected inflation, debt – everyone has too much of it; a correction in asset prices.
Upward revisions to growth are not quite across the board, however, with UK prospects running somewhat behind other developed economies this year and next. While the worst post-referendum predictions have not materialised and UK manufacturing is on the up, GDP growth is still down on where it would otherwise have been, with more of the same likely this year. (We'll be publishing our update forecasts alongside our 2018q1 Manufacturing Outlook on 5th March).
We could be Canada
Beyond that, a lot still hangs on the outcome of Brexit negotiations (one of the things we did not learn more about yesterday). For all the reasons outlined in Martin Wolf’s blog, a Canada style outcome is what we should be preparing for after a ‘stand still’ (or as others like to call it transition/implementation) period.
Many of the delegates I spoke to may have found his rationale persuasive, but both messenger and message was nevertheless in question. As EEF’s Chair, Judith Hackitt, said in her speech on Tuesday ‘ultimately we need clarity and certainty. We must avoid new trade barriers, complex customs arrangements, or vastly different regulatory environments.’ It is not clear that a CETA type arrangement would clear all of these hurdles. Nor did we get a definitive steer from the political keynotes that this is what the UK will end up shooting for – only that government ‘opposes erecting barriers to trade where none yet exist’.
Growth markets of the future
No matter, EU, Schmee-U. The rest of the world wants to buy British. The Secretary of State for International Trade is already laying the ‘groundwork for new trading relationships with countries across Africa and Asia.’ This is, after all, where the big chunk of global growth will come from in the next decade.
The fact that last year the UK’s total goods exports to the African continent equalled half the growth of our exports to the EU does concern me a little – lots of opportunity, but that will need to be grasped pdq.
Back to banks
In addition to all speakers (rightly) agreeing that manufacturing is super important, the sector’s access to finance to support growth and exporting is also crucial. The Leader of the Opposition used his platform to outline a reform agenda to the UK’s finance landscape to ensure it works for the real economy. Talk of new regulation and Labour’s proposals for a large scale National Investment Bank would shake things up. However, as we’ve said before on access to finance, new measures need to tackle the challenges of today and tomorrow rather than harking back to the last crisis.
We’ve had a go at a bit of a stock take to see where action needs to focus now.
The economic risks from the acquisition of British industrial assets by a foreign company were more clearly defined yesterday (note – there are also plenty of upsides too). There was further policy content from the Labour Leader here, with a pledge to extend the public interest test.
We’ve also set out some thoughts on this, particularly around one consequence which we believe is often overlooked – the impact on the supply chain. You can read the full details in our policy paper.
Industrial strategy – out of the starting blocks
And so to Industrial Strategy – one of the main themes of the speech from the Secretary of State for Business, Energy and Industrial Strategy. The 'to do' list on the white paper implementation is massive, but at the top is the establishment of the independent Council.
The BEIS Secretary reiterated this, setting out that the Council will be instrumental in setting and measuring the success of the strategy – 50% of which we are fully behind – see which 50% here.
Made Smarter Commission
There was also a modicum of new information about the rather protracted Sector Deal process – critically for manufacturing a few steps forward on the Made Smarter sector deal on industry digitalisation.
A new Commission is to be created and UKRI will also get stuck in to develop ‘an Industrial Strategy Challenge on the digitalisation of our manufacturing industry.’ Both are necessary to corral cross-government action around this multi-faceted challenge, but like those formative trade deals, this is groundwork, there’s a great deal more that industry and government need to do together to equip the sector with the technological tools for future success.