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Britain must choose an ‘open economy and free trade’ after Brexit

27 Sep 2016

Simon Walker discusses open economy and free trade at the IoD Annual Convention 2016IoD Direct General urges Government to reject protectionism and instead prepare the workforce for the jobs of the future

  • Business group says Labour need to provide a more effective opposition to the Government

Brexit has to be seen as the event of the year”. Simon Walker, Director General of the Institute of Directors told an audience of 2,000 business leaders at the Royal Albert Hall this morning. “It’s not what most of business wanted,” he said, “but it’s what we’ve got, and we have to work with and make the best of the opportunities it will provide.”

Walker cautioned against reverting to the insularity of the seventies:

“To me the choices are clear: is a post-Brexit United Kingdom going to revert to insularity and protectionism, slashing immigration, subsidizing failing industries and curbing foreigners investing in British businesses? That was Britain in the sixties and seventies.

“Or will we choose a different future, equally rooted in historic tradition, and revived in the 80s: an open economy based on free trade and deregulation, where competition drives public policy, and aspiration replaces entitlement.”  

He called for the Government’s new industrial strategy to focus on re-skilling workers affected by globalisation rather than subsidising uncompetitive industries:

“Will “industrial policy” involve reskilling those who make bulk steel, so that they can move to sophisticated high tech products where Britain retains a competitive edge?

“Or will Britain simply block steel imports from China and pour funds into subsidising uncompetitive plants as a method of retaining jobs?

“Down one path lies adapting to change: to thrive by finding new opportunities in the global marketplace. Down the other is stultifying bureaucracy, corporate protectionism and managed industrial decline.“

The IoD Director General also lamented the fact that the Labour party was not operating as an effective Opposition, to keep “the other guys honest”:

“I am not anti-Labour. I was a member of the Labour Party, Chairman of the Labour Club at university: my first job was working for a Labour politician.

“Opposition parties of any political colour can engage productively with business, taming the excesses of capitalism, and - vitally - monitoring government: keeping the other guys honest. But for this to be effective there has to be some prospect of ever winning an election. At the moment, that is entirely absent.

“Look, there is stuff the government is getting wrong.  The detail is often flawed. There are mixed messages where business needs certainty. Whatever your politics they need to be kept on their toes.”

Full Text

Welcome to the IoD’s 67th convention.

When I stand here, I’m reminded of the times I’ve been sitting where you are today, looking at the stage. What a lot we have to live up to. Thursday’s Telegraph review for example, began with the words “I have never witnessed an audience response at the Royal Albert Hall quite as rapt and intense….the standing crowd pressed against stage barriers in silent awe as if bearing witness to a religious visitation. “I think I might cry” whispered one woman…..

Now it’s true, that was the Icelandic singer Bjork on Wednesday night. But I promise, our speakers will be equally gripping. And I fully expect that at 4.30 this afternoon, after you have heard Kelly Holmes and Kevin Roberts, you will become, in the words of the Telegraph, “the crowd (that) finally broke its rapt spell, stamping the floor and taking up the song’s “ooh-oooh-oooh-ooh” chant, refusing to move even after the house lights came on….

It would not be the first time an IoD event ended in hysteria. Some of you were at my first Convention as DG at the O2 in Canary Wharf five years ago. You rightly applauded our farsightedness and generosity in giving a hundred free tickets to fifteen and sixteen year olds from local schools. These are, after all the entrepreneurs of the future and their enthusiasm was clear.

Unfortunately, and I fear I must take responsibility for this, we’d forgotten that our renowned lunch boxes, which you will enjoy later, included half a bottle of rather good wine. As a result our young entrepreneurs either fell asleep or chatted and chortled through the excellent afternoon presentations.

I warn you not to try bunking off this afternoon or our Chairman, Lady Barbara Judge, will really put you on the naughty step.

I’m delighted to see so many of you here this morning, when – who knows? – you could so easily have been out on the golf course having a couple of rounds with Liam Fox.

It’s been a strange year for business.  Lord Melbourne, whose profile has been raised thanks to ITV’s “Victoria”, spoke after the 1832 Reform Act of how “what all the wise men promised would happen did not happen, and what all the damned fools said would happen, has come to pass”.

The European referendum result surprised all the wise men: if we end up with President Trump, the year will become stranger still.

Brexit has to be seen as the event of the year for IoD members. It’s not what most of business wanted. But it’s what we’ve got, and we have to work with and make the best of the opportunities it will provide.

To me the choices are clear: is a post-Brexit United Kingdom going to revert to insularity and protectionism, slashing immigration, subsidizing failing industries and curbing foreigners investing in British businesses? That was Britain in the sixties and seventies.

Or will we choose a different future, equally rooted in (historic) tradition, and revived in the 80s: an open economy based on free trade and deregulation, where competition drives public policy, and aspiration replaces entitlement.  

We all accept that government is complicated, and has to balance competing needs. But we hope the government chooses the route that future-proofs – that brings workers the ability to adapt to the changes the gig economy brings.

Will “industrial policy” involve reskilling those who make bulk steel, so that they can move to sophisticated high tech products where Britain retains a competitive edge?

Or will Britain simply block steel imports from China and pour funds into subsidising uncompetitive plants as a method of retaining jobs?

Down one path lies adapting to change: to thrive by finding new opportunities in the global marketplace. Down the other is stultifying bureaucracy, corporate protectionism and managed industrial decline. 

Britain rode out the recession on the back of entrepreneurs and innovators who tested out their ideas in a free market, where good products survive, and others do not. I feel that energy, that spark, every single day when I walk through the Directors’ room at our headquarters. The Government must not do anything to limit that drive to build better businesses, a better economy and a better Britain.

Here our strange year has seen another eventuality: the virtual demise of the Labour opposition. All governments need scrutiny and Theresa May’s is no exception. It is vital that over the next four years, the changes to our trading architecture of more than four decades are critically evaluated.

The IoD is a non-political body, and no one should imagine we are hostile to the Labour Party. While we didn’t support aspects of their policies, no one doubted that Ministers like Gordon Brown, Ed Balls, Peter Mandelson and Patricia Hewitt got the importance of business in generating the money that funds schools, hospitals and all the public services we take for granted. 

They had some good ideas, which actually helped many of you.

The Conservative Party does not have a monopoly on pro-business policies. But it is hard to engage with a parliamentary opposition that seems to regard it as a badge of shame to be involved in productive enterprise.

Meeting the Mayor of London, Sadiq Khan, last Friday, I was reminded of that. We don't agree on everything.  But he knows where the money comes from.

He understands that making it easy for companies to do business, bringing in global talent and strengthening infrastructure ultimately benefits everybody.

His stand-out feature, which I hope is getting noticed in Liverpool, is that he actually got elected - with significant business support.

I am not anti-Labour. I was a member of the Labour Party, Chairman of the Labour Club at university: my first job was working for a Labour politician.

Opposition parties of any political colour can engage productively with business, taming the excesses of capitalism, and - vitally - monitoring government: keeping the other guys honest. But for this to be effective there has to be some prospect of ever winning an election. At the moment, that is entirely absent.

Look, there is stuff the government is getting wrong.  The detail is often flawed. There are mixed messages where business needs certainty. Whatever your politics they need to be kept on their toes.

-----------------

Brexit was, among other things, the cry of those who have lost out from globalisation. The chief economist at the Bank of England tells us that by 2030 15 million people could lose their jobs through automation. 

We do have something in common with those who prioritise re-skilling the marginalised: who want to see government put more into vocational training, and lifelong learning. Who want everyone to benefit from economic progress.

We believe governments should take a long-term view, rejecting mickey-mouse tinkering, arbitrary rules, and poorly thought out levies that limit a company’s ability to hire and train.

That they should spread the benefits of globalisation, acknowledge the inevitability of disruption, and plan for jobs not yet created in industries that are still to emerge.

And governments should tell the continuing truth about policy: that ultimately competition and openness provide the best grounding for a stable society. 

I would not have used Liam Fox’s words about businessmen playing golf on a Friday afternoon.

But I also read other bits of that speech:

  • how “we must turn our backs on the voices that tell us: it’s OK, you can protect bits of your industry, bits of your economy and no-one will notice….protectionism has always ended in tears”
  • how “free trade is the tool that has taken more people out of poverty than anything else in history”
  • how Britain is strongest as an “outward-looking, forward-looking, free trading nation”

Perhaps the strange events of 2016 bring opportunity.

Max Weber wrote that it’s not true that good can only come out of a positive event, and that bad things inevitably follow a negative occurrence. Often the opposite is true.

I leave the IoD at the end of the year.

Over the years I’ve introduced some extraordinary people on this stage, who have introduced some remarkable ideas.

Who can forget Richard Branson talking about his early challenges; Chuka Umunna’s speaking of his father, an immigrant from Nigeria whose business career took off when he joined the IoD; Travis Kalanick, launching his new Uber-X service in London; or David Miliband highlighting the refugee crisis that threatened European unity.

Thank you to the IoD’s staff and to you, its members, for five roller-coaster, but very fulfilling years. I don’t want to see Britain, or the IoD, looking backwards. If all of us - government and business - are going to survive and thrive through the 21st Century, we cannot cling to the relics of the 20th.

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