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Brexit Central: The Government must embrace an enterprise strategy to reap the rewards of Brexit

Date: 08 03 2017

The Government must embrace an enterprise strategy to reap the rewards of Brexit

When the head of Peugeot Citroen declared that a “hard”, clean Brexit provided superior opportunities for UK auto manufacturers, he was the first multinational leader to recognise publicly the enormous and manifest economic benefits that a “clean” Brexit presents, in stark contrast to the CBI.

Of course, capitalising on these benefits depends very much on our Government adopting the right policies and starting to prepare the country early for this outcome, which can only be achieved if we leave the Single Market and the Customs Union. This preparation should start now, with today’s Budget.

Leaving the EU creates both the opportunity and the imperative for the Government to create an enterprise economy, including the re-balancing that the previous Chancellor frequently spoke of, but signally failed to deliver. The creation of an Enterprise Strategy, providing the “primordial soup” from which business and economic life will spring and grow, with the winners picking themselves, contrasts sharply with yet another failed Industrial Strategy – so favoured by the likes of Lords Heseltine and Mandelson, so out of date and stultifying – and will be vital if we are to maximise the potential Brexit creates.

The Enterprise Paper launched this week by Leave means Leave, available online here, sets out the argument for an Enterprise Strategy and argues that this is at least as high a priority as the upcoming negotiations with the EU. While a Free Trade Arrangement (FTA) with the EU is desirable, and possibly even optimal as long as we don’t have to give anything of significance to achieve it, the Government should make an early judgement call about whether such an arrangement is likely. If it is not, they should avoid wasting time and resources on fruitless discussions, instead throwing more resource into preparing the enterprise economy into crystallisation of the benefits of Brexit.

These latter are a “six plus one”:

  • Abolition of the CAP;
  • Repatriation of fisheries with the boost to the industry that this will engender;
  • Repatriation and investment of the net contribution, plus better use of the balance of the gross contribution;
  • FTAs with countries around the world, preferably signature-ready for Brexit;
  • Deregulation, the equivalent of a tax cut for business; and
  • The removal over time and as soon as possible, of external tariffs. (These latter two alone are worth up to 6% of GDP!)

Those are the six, but what of the one?

The group Economists for Free Trade have estimated the cost to the UK taxpayer of migrants in low-paid, unskilled jobs as £3,500 per annum per individual – a huge drag on the economy and strain on public services and social cohesion. It is simply bizarre that we are asking taxpayers, often themselves struggling, to subsidise multinationals to employ imported cheap labour and thus denying those jobs to British citizens.

This is all too often a substitute for investing in educating and training home-grown talent and investing in plant and machinery, thus encouraging the promulgation of a low-wage, low-productivity economy, with its consequent drag on growth, at the very time that we have nearly 600,000 unemployed (and now all too often unemployable) under-25 year olds.

Quite apart from crystallising the benefits of Brexit, the imperative and opportunity now presented to government to change tack on economic development will put Britain on track to become the best place in the developed world in which to do business.

Investment in physical infrastructure not only facilitates doing business, but is widely recognised as an “economic multiplier”. We need to become also a world leader in digital and fibre connectivity, rather than a laggard. Providing access to non-equity working and loan capital, so that SMEs can grow and we can develop our mid-sized business sector, is so important to our future.

Proper effective export support, comparable with competitor countries and less emphasis on bad inward investment, will re-balance the economy and help resolve both our balance of trade and current account deficits. Finally, and crucially, a re-emphasis on education and training, where various talents are recognised, funded and developed equally – artisanal, technical and academic – will be essential in a world of home-grown talent and higher wages, investment and productivity. This, of course, is not just the responsibility of the state, but also of corporates.

The creation of a favourable tax regime for entrepreneurialism, investment, R&D and for business growth will be essential.

It is by embracing all these things that we will create a truly enterprise economy and reap the rewards of Brexit. An economy which will create more wealth and jobs, be stronger and more enduring than would be the counter factual of staying in the EU, the Single Market and the Customs Union, even if these do not in the meantime implode.

The prize is ours to grab or to throw away.