It’s cru­cial Bri­tain steps up in­vest­ment to seize the post-brexit div­i­dend

The Sunday Telegraph - Money & Business - - Business - Nigel Wil­son is chief ex­ec­u­tive of Le­gal & Gen­eral NIGEL WIL­SON

Our in­abil­ity to close our 30pc­plus pro­duc­tiv­ity gap with France, Ger­many and the US, cou­pled with our fail­ure to de­velop scaled-up tech­nol­ogy busi­nesses, will have a greater im­pact on our long term eco­nomic growth than Brexit. The UK is a high em­ploy­ment low wage econ­omy with me­dian real wages stalling for many years. This has to change. Our prob­lems are solv­able. There has been struc­tural un­der­in­vest­ment in the UK econ­omy since the Seven­ties in many sec­tors. We also know that mod­ern ur­ban­i­sa­tion drives eco­nomic growth and that our so­ci­ety is age­ing. UK poli­cies and in­vest­ment need to re­flect th­ese trends.

Devo­lu­tion is one of the so­lu­tions. Re­cently the Prime Min­is­ter signed fur­ther city deals in New­cas­tle and Ed­in­burgh, fol­low­ing suc­cess­ful deals in Birm­ing­ham, Cam­bridge and Greater Manch­ester. I have met many of the po­lit­i­cal, busi­ness and univer­sity lead­ers in th­ese ci­ties. They are de­ter­mined in their shared goal of de­liv­er­ing bet­ter eco­nomic and so­ci­etal out­comes for their ci­ti­zens.

Our out­stand­ing uni­ver­si­ties have recog­nised that within their world lead­ing re­search are bril­liant com­mer­cial ideas. To drive eco­nomic growth they need to cap­i­talise on them like their US equiv­a­lents. Our uni­ver­si­ties are brim­ming with mil­len­ni­als with com­mer­cial ideas. Ox­ford Sciences In­no­va­tion and Cam­bridge In­no­va­tion Cap­i­tal, are ahead of the game. Oth­ers are fol­low­ing, they need to speed up. Our great uni­ver­si­ties are a world-class ex­port in­dus­try, with around half a mil­lion over­seas stu­dents pay­ing large sums (fees up to £38,000). Our best for­ward-look­ing uni­ver­si­ties are us­ing this bo­nanza to cre­ate UK start-ups.

Our ven­ture cap­i­tal in­dus­try, although best in class in Europe, lags the US. We are world lead­ers in start-ups, in­clud­ing ge­nomics, stem cell, de­men­tia and fin­tech. How­ever, the dearth of se­ries B and C fi­nance, namely the £5m – £20m re­quired to grow, means too few are be­com­ing scaled-up. The con­se­quence is too many fail­ures and those that do suc­ceed get sold early. The signs are that ad­di­tional cap­i­tal is com­ing, but the trickle needs to be­come a wave.

The re­moval of the OJEU pro­cure­ment rules (which re­quire con­tracts to be en­tered in the Of­fi­cial Jour­nal of the Euro­pean Union so all EU en­ti­ties can bid) should also ben­e­fit the UK econ­omy. This time­con­sum­ing bu­reau­cracy was de­signed to en­cour­age com­pe­ti­tion, but con­fuses cheap­est price with best value. Best value of­ten in­cludes lo­cal eco­nomic ben­e­fits where a lo­cal sup­plier is cho­sen. A fear of the EU27 is that out­side the EU we can in­ter­pret state aid so it works bet­ter for our more de­prived ci­ties and re­gions. This isn’t an ar­gu­ment for hand­outs or back­ing lame ducks, but a recog­ni­tion that we can lend money in a bet­ter­tar­geted way.

The en­ergy world is be­ing turned up­side down. In hind­sight the ex­cel­lent for­ward-think­ing work of Nick Stern and Lord Adair Turner wasn’t suf­fi­ciently op­ti­mistic. Progress in en­ergy ex­ceeds their ex­pec­ta­tions. There­fore, there is a real chance for “clean green and cheap” en­ergy to re­place car­bon. Our great re­search in so­lar, wind and nu­clear fu­sion needs com­mer­cial­is­ing through in­vest­ment.

Economists are also be­gin­ning to recog­nise that un­less peo­ple work longer, ag­gre­gate de­mand, in­vest­ment and taxes will all fall re­duc­ing growth and wealth. In­vest­ment and wages have to in­crease but also at a rate that in­creases their share of GDP.

We have cre­ated an al­most per­fect eco­nomic back­ground for pa­tient and in­clu­sive cap­i­tal in­vest­ment; low in­ter­est rates, com­pet­i­tive ex­change rate, low wage costs, low in­fla­tion, an abun­dance of start-up com­pa­nies, £300bn in­fra­struc­ture deficit, bril­liant sci­ence and en­er­getic entrepreneurs. It will be a tragedy if we don’t seize th­ese op­por­tu­ni­ties by step­ping up in­vest­ment across the UK.

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