How to add £130bn to the UK economy
Next CBI boss finds ray of hope in crisis...
THERE are few silver linings to this pandemic. But ‘for tragic reasons’ a more efficient economy could perhaps be one of them, says Tony Danker, incoming director general of Britain’s biggest business lobby group, the Confederation of British Industry. Danker, who joins the CBI in November replacing Dame Carolyn Fairbairn, has spent the past three years spearheading an organisation charged with solving Britain’s productivity crisis ‘from the bottom up’.
He admits that this is an issue on which ‘Britain hasn’t done very well for the past 12 years’ since the 2008 financial crash.
‘Most of the policy levers weren’t fixing the problem, or would take a generation to take effect,’ says Belfast-born Danker, currently chief executive of Be The Business, a Government and industry-funded body, with a mandate to improve productivity.
He names infrastructure spending and improving skills as two important, but slowburning, boosters for productivity. His conclusion? ‘Government can’t fix the productivity problem; business has to.’
The figures are stark. A report in February detailed how the slowdown in productivity over the past decade – measured as economic output per worker per hour – has been the worst since the industrial revolution began 250 years ago.
Economists worry that sluggish productivity growth, barely above zero and more pitiful even than in the 1970s, has held back improvement in living standards in the UK.
New data due out this week will show the situation, predictably, going from bad to worse during the coronavirus pandemic. But Danker says the coronavirus crisis may have forced the solution upon us – a ‘once in a generation opportunity’ to capitalise on the ‘Zoom boom’.
He says there’s an ‘unprecedented thirst’ from millions of businesses for ‘things that frankly we [at Be The Business] would have bitten your hand off for a year ago’.
‘You’ve got a huge drive for efficiency, huge interest in technology and huge innovation,’ Danker says, outlining in a sentence the desperate measures many have pursued to rewire their businesses.
‘If you try to sell businesses a ton of new tech right now and tell them this will help you innovate and grow, I’m not sure how interested they’re going to be. If you tell them it will help them be more resilient – that’s more interesting.
‘So, if there’s a second wave, or Brexit hiccups, they can say: “Do you know what? I’m confident I can keep my business running”.
‘It’s a tragedy that it’s taken a global pandemic to do it,’ he adds, but says it is a shock that has stimulated new ways of thinking.
Two thirds of firms have changed their approach to technology since March, according to a Be The Business study. A third have adopted new technologies or intend to ‘soon’. As well as video conferencing, that includes project management and customer relationship management systems, e-commerce, cloud-based HR and data analysis software.
Any gains are likely to be masked by huge drops in overall economic output. But Danker wants to turbocharge the revolution, tying up with Facebook to encourage small and medium-sized enterprises (SMEs) to learn from each other.
A regional roadshow – digital, of course – targeting 11 big cities follows from the end of this month.
‘What’s really interesting about the last three months, talking to business owners, is that they have exerted more leadership in decision making than in years.
‘They are also ferocious about finding productivity gains – cutting costs, being smarter about the use of premises, thinking about tech. I think that’s the low hanging fruit – and there’s a lot of money in it.’
But he says: ‘Now there is a set of really complicated decisions for each of these firms as we restart – harder than lockdown. Don’t underestimate what a big deal this is.
‘There are 1.4million small business owners with some big calls. I think they are going to make the decisions that affect employment and they are going to be the judge of whether or not anything the Chancellor does has worked.’
Danker spent a decade at global consultancy McKinsey and was an adviser to the Cabinet Office and Treasury under the last Labour Government.
In 2010, he went to the Guardian Media Group, latterly as chief strategy officer, before being hauled in to launch Be The Business
in November 2017 as part of plans originally hatched by former Chancellor George Osborne to solve the productivity crisis.
It is chaired by former John Lewis chairman Sir Charlie Mayfield and its advisers include RollsRoyce chairman Sir Ian Davis, BAE Systems chairman Sir Roger Carr, Lloyds Banking Group chief executive Antonio Horta-Osorio and Dame Carolyn Fairbairn.
Danker reels off anecdotes from small firms he’s spoken with – a Cornish pub, a Cumbrian manufacturer, an HR consultancy – with myriad conundrums. But he suggests: ‘There’s a realisation now how much SMEs are the backbone of the economy – 60 per cent of private sector employment and even greater outside the South East.’
He says a 10 per cent rise in productivity in the smallest 75 per cent of all firms – the ‘long tail’ – could add £130billion to the economy.
‘I’m not pretending that’s easy. But you just need tar manufacturers to be better tar manufacturers. We need to help hospitality businesses find a path back to growth.
‘Three years ago we were talking of the importance of high growth sectors – life sciences, high tech. Now I think we’ve realised that the high employment sectors of retail, construction, hospitality – these are vitally important sectors to the economy, to recovery, to jobs.’
With a cautious nod to his agenda in his next role, which he joins at a pivotal time, he suggests Government needs to be sensitive to the slow awakening from lockdown many small firms face.
He says: ‘It’s why organisations will talk of a tapered end to support rather than a sudden end to lockdown. Restarting is complicated. Cost comes back straight away but demand doesn’t. If the Chancellor is to proceed with a levelling-up agenda that’s only about public investment it won’t be enough.’
He says business sector recovery needs to reach those parts of the country which have the lowest productivity and high unemployment, adding: ‘London has superb levels of productivity but it’s the regional economies that have fallen behind. The risk is they fall behind more.’