Emma Watkins: Confidence a key ingredient to a sustained recovery
This column appeared in the Western Mail on Wednesday, 12 December, 2012
Last week saw the highlight of the CBI’s activities for 2012, marked by our CBI Wales annual dinner.
Around 450 business people from across Wales joined the First Minister and Secretary of State, as well as a number of colleagues from government, politics and the media at Cardiff City Hall to mark the year gone by and prepare for the challenges and opportunities to come.
The keynote speaker, Cardiff University alumnus CBI Deputy dDirector-General Dr. Neil Bentley, set the scene with a speech reflecting on his year at the helm of the CBI, representing business to governments around the world.
Right now, of course, the outlook is not great. Economically, Wales is going through tough times, however the overriding message from Neil’s speech was that to push the economy forward, business and government have to recapture the optimism and drive of our industrial heritage and look ahead, not in the rear-view mirror.
Neil’s speech contained five critical messages to government which are worth reiterating here. Firstly, the surge in growth of the UK economy by 1% in Q3 was very welcome but strip away the Olympic boost to consumer spending and the overall trend remains flat.
Despite this and other projections for only modest growth in 2013, the CBI is continuing to back the UK government’s overall economic strategy of tackling the deficit, whilst maintaining the pressure on governments in Whitehall and in Cardiff Bay to do more to drive growth within the current fiscal constraints - because we believe this approach is the only way to get our economy back on track.
Secondly, real action on infrastructure, investment and exports is needed today.
The CBI was pleased to hear the Chancellor prioritise these in his Autumn Statement but government now has everything to prove by delivering.
Business needs government to bring forward action on key projects, including the M4 relief road, immediately.
Businesses need to see the words of governments in Wales and Westminster translated into building sites on the ground.
Thirdly, confidence is key. On Neil’s recent trade visits to Mexico and China he was left with the strong impression that confidence about the future, and the belief that the UK can and must play a part in it, are a key part of a successful economy.
But many British people have forgotten what that feels like. As Danny Boyle’s opening show at the Olympics reminded us, from the industrial revolution to the digital revolution much that has transformed the world and how we live and work was invented here.
Far from being unable to keep up, in many races Britain has been the pacemaker. What is encouraging is that people overseas get that – including in places like Mexico but also in Brazil, Russia, and South Korea.
Ask the British people if we have a strong economy, only 13% say yes. Globally, 48% think we do. Because Britain has a strong reputation for respecting the rights of our citizens, for obeying international law and for having a good standard of living.
Our language, our time zone and our history all play in our favour. These are powerful assets which, if used correctly, could grow our economy and create jobs.
Fourthly, we need to realise that across the world, Britain’s reputation is high. It is why exports are so important to our recovery. And nowhere more so than in Wales, where an army of dynamic mid-caps contribute to the most positive trade balance in the UK.
Across the UK as a whole it is more than 14 years since net trade in goods and services made a positive contribution to GDP. But there is progress. This summer we have exported more outside the EU than inside it.
Until then, that had not happened since the early 1970s. And again, Wales is leading the way – almost 60% of Welsh exports now go outside the EU - significantly ahead of the national average.
Finally, every part of Britain has a vital role to play in our future. The CBI has been working to identify the underlying strengths in the UK economy – not just as a whole but in different regions and nations.
Most people realise that we need to rebalance the whole UK economy away from consumer and state spending, and move it towards business investment and trade.
In Wales, despite the trade figures, this challenge is acute. With the highest proportion of state employment in the UK, there is much to do to support expanding businesses pick up the slack from a retreating public sector.
But the form is good. Vector Technology, a medium-sized business in Port Talbot who developed a key part of the solution to plugging the oil leak in the Gulf of Mexico two years ago, is now global hot property, opening new offices from Texas to Malaysia.
Recent economic events have provided us with the mother of all reality checks. There is no magic wand any government can wave to change this.
So we need not only to manage expectations of any rapid return to prosperity, but also help create the conditions for longer-term success.
Future success will come by being flexible, by giving long-term certainty for investment and by having tax, R&D and public procurement policies that help stimulate economic activity.
But the flip side of all this is we need the public to have confidence in business, so that when businesses call for tax breaks and deregulation, they truly understand the result will be growth and jobs.
We have got a long way to go, but it is clear that Dr Bentley’s speech started that conversation, and we hope that 2013 will continue it.