Britain is running a massive and growing balance of payments deficit. From a position of near-balance in the early 1990s, the 2010 deficit for goods and services - GBP46.2 billion - was the highest ever. For many years we have relied on the success of our service sector (especially financial services) to make good the deficit. However, the financial crash of 2008 suggests we would be unwise to continue placing our trust in this method of plugging the gap. Alan Reece, an academic-turned-successful-manufacturer, argues that we must revive our manufacturing industry. However, the problems are enormous. Between 1997 and 2008 manufacturing output remained flat at around GBP150 billion a year. Allowing for inflation, this represents a real reduction of around GBP3.5 billion a year. The decline in manufacturing has been so steep that important links have disappeared from every chain. Manufacturing in Britain becomes harder as more and more components have to be imported. On top of this, the Coalition Government's policy of ramping up energy prices beyond competitor nations makes it all the more attractive for industrialists to move their enterprises abroad.
Once the workshop of the world, and the cradle of the Industrial Revolution, Britain now ranks around 20th in international league tables of manufacturing output per head, below South Korea and Taiwan. Alan Reece argues that we need to increase our output of goods by GBP10 billion a year for ten years, increasing the workforce employed in manufacturing by 200,000 a year. Exports are vital to our economy, but difficult to increase substantially, given the weaknesses of the British manufacturing base now. A more realistic policy for fixing the balance of payments is to import less, by producing more goods, food and energy for the home market. Alan Reece calls for a Minister for Economic Growth, with Cabinet rank, whose sole purpose would be to ensure that each quarterly trade deficit in goods should be smaller than the last one. The aim should be to reduce the balance of trade to -1 per cent of GDP in ten years. As Cambridge economist Ha-Joon Chang concludes in his foreword: 'If you have thought that Britain could "muddle through" this crisis, read this paper and think again.'
- ISBN10 1906837295
- ISBN13 9781906837297
- Publish Date 31 July 2011
- Publish Status Active
- Publish Country GB
- Imprint Civitas
- Format Paperback
- Pages 43
- Language English