As David Cameron arrives at Davos this week for the World Economic Forum he should spend less time rubbing shoulders with celebrities at star-studded parties and give the martinis a miss to focus on another cocktail – what George Osborne has himself suddenly described as the ‘cocktail of threats’ facing Britain.
Both Cameron and Osborne must realise that action to deal with our yawning trade deficit is vital. British-based exporters are having to contend with an array of advancing threats including a deteriorating global economic outlook, so Britain cannot afford to be complacent.
The current account deficit – made up primarily by the country’s deficit on imports to exports – now stands at 5.1 per cent of GDP and is higher than at any point in peacetime since 1830. It is yet further evidence of the Tories’ abject failure to develop a serious and long-term strategy on trade, or indeed an industrial strategy as a whole.
Just as Osborne is failing to meet the targets he has set himself on the debt and deficit, he is also on course to miss his own exports target.
His target to increase exports to £1tn by 2020 was always going to be tough, but he appears to have lost interest in achieving it immediately after sending the press release.
Last July the Office for Budget Responsibility forecast that total exports of goods and services will hit £630bn in 2020 – a third less than the chancellor’s target. The government is now moving to get their excuses in early with the trade minister Francis Maude this week describing the export target as a ‘big stretch’.
While the government boast about economic recovery, the United Kingdom is falling behind our competitors when it comes to exports. The divide, when compared to our European counterparts, is stark. Proportionally, we export less than Italy, France and Germany.
And our manufacturing sector, which has been so badly neglected by this government, is in a particularly challenging situation. Manufacturing exports have slumped with British manufacturing in recession since last year and output still falling short of where it was in 2008. The Tories’ complacent attitude to the UK steel industry is just one symptom of their neglect of manufacturing and our industrial base.
So the scale of the challenge is clear. Solving it will require a government committed to using all its power and influence to make a difference.
Britain needs a government determined to develop a serious and long-term strategy for our exporters, to open up new overseas markets, develop our existing relationships and forge new ones. We need action to boost productivity, address the skills emergency, tackle our ageing domestic infrastructure and ensure improved access to finance for our innovators.
Britain needs a government determined to empower and enable those who can really deliver this transformation, but instead we have a business secretary so hidebound by laissez-faire economic dogma that he will not even let the phrase ‘industrial strategy’ cross his lips.
As part of a serious and long-term strategy for exporters, the government must address the suboptimal performance of UK Trade and Investment, the department tasked with working with British businesses to promote trade and exports.
While the Tories are busy cutting its annual budget by £42m over the next four years, Labour believes that UKTI is in desperate need of reform. If the government is not careful, like so many of the chancellor’s other cuts, the Tories risk making yet more false economies.
To make matters worse, the Tories are putting the long-term security of UK trade at risk by flirting with exit from the European Union.
At present Britain sits at the gateway to a European single market of 28 countries and over half a billion consumers. Almost half of our exports go to EU countries, worth £227bn last year to the UK economy, is in risk of being undermined. While the Tories tear themselves apart over Europe, Labour is clear that it is in Britain’s national interest to remain in the EU.
As the rich and the famous congregate in the Swiss alps this week, British businesses will want to know what concrete actions Cameron and Osborne are taking to address the structural weaknesses in our economy.
Given the scale of the challenge, Labour has argued that we need a serious and long-term strategy to help our exporters. Only by launching an all-out assault on our poor export performance can we ever hope to reverse our long-running trade deficit.
Angela Eagle MP is shadow secretary of state for business and shadow first secretary of state. She tweets @AngelaEagle
This piece forms part of today’s guest-edit of the Progress site by Stephen Kinnock MP, covering the discussions at Davos on the economy, business and the World Economic Forum’s central theme this year of ‘The Fourth Industrial Revolution’. Follow the guest-edit today here
Photo: World Economic Forum
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