A few weeks before the controversial draft agreement was published outlining the terms of Britain’s exit from the European Union, Deutsche Bank’s chief economist David Folkerts-Landau offered the following prognosis on Brexit.
"I believe that over a 20-year, 30-year horizon," he told Bloomberg’s Tom Keene, "the UK will do just as well or better than the European Union."
He went on to explain: "The UK economy has a certain flexibility, it has it in its genes to do well, to be innovative. It doesn’t have this bureaucratic construct the Europeans have to struggle with. And it’s got a flexible exchange rate, so I think this will come out just fine."
His calm, almost lackadaisical, analysis was in sharp contrast to the near hysterical baying of British politicians on both sides of the Brexit divide. Folkerts-Landau was looking beyond the immediate horizon of a "painful" post-Brexit adjustment period, of course, and taking a longer view of how unsettling disruption might help UK businesses to exploit the flexibility and creativity in our cultural "genes".
Arguably the shock of the 2016 referendum, and the way it served to highlight the population’s feelings of vulnerability and dependence on the EU, actually positions the UK more favourably, making innovation more urgent than was the case when the nation still fancied itself as a global, post-imperial power.
Back in March 1969, reflecting in Management Today on (what was then) the miracle of the Japanese economy, Peter Drucker offered his view of why Britain, despite its "new technologies, new factories, higher levels of skill, of education and economic performance", had fallen so badly behind.
"One of the main reasons," Drucker argued, "is that Japan made the world economy determine her economic policies, whereas Britain made her economic policy serve principally to maintain her traditional domestic economy."
This analogy seems as prescient today as it was in 1969. The ultimate success of UK business post-Brexit will depend on how it adapts to and relates to the world economy’s dominant global triumvirate of the US, the EU and China. As our Secret Brexiter column suggests on page 86, British businesses should take a leaf out of the book of global corporations, which succeed "by hedging their bets and striking alliances with all three power blocs".
Management Today is committed to a new mission in the post-Brexit era (whatever its final outcome) to champion British business; to enable it to become more fleet footed, to value growth and scale, and to compete globally. Above all, we want all British businesses to aspire to be world-class in leadership, manufacturing and productivity, innovation and technology, people and talent, ethical sourcing, supply chain and sustainability, brand marketing and trust, competition and collaboration.
In the magazine, as well as through our website and social media channels, we will reveal how top-in-class businesses practise their craft; we will explain technological transformation and unpick the innovations disrupting traditional business models; we will curate the freshest thinking from top leaders, academics and authors; we will make sense of high level management and business strategy; we will reflect on the impact of good and bad leadership on productivity and results; and we will go beyond short-termism in examining the role of purpose and long-term thinking in sustainable businesses.
If innovation, entrepreneurialism and flexibility are markers of a buoyant economy, then there are plenty of reasons to be optimistic, to hope that the long-term prognosis for the UK, with its truly global "Alpha ++" capital city and culture of creativity, is surprisingly good.
Here, we highlight five of these factors with supporting evidence: the London construction boom, the autonomous vehicle land grab, the soft power of brand Britain, a supercharged higher education system and our readiness for the "fourth industrial revolution".
The Tulip skyscraper
The Tulip is a 300m skyscraper and tourist attraction planned for the City of London, and slated for completion in 2025. Designed by architects Foster + Partners (of the Gherkin fame), the flowerbud-shaped building is just one of a record number of tall buildings in London’s pipeline that will transform the City’s increasingly distinctive skyline over the next decade.
According to the London Tall Buildings Survey, there were 510 skyscrapers in the development pipeline in 2018, a figure that has risen steadily from 263 in 2014.
The canopy of cranes surrounding London is a tangible sign of a city (literally) on the up. Vast swathes of brownfield land are under redevelopment at this very moment, from the 85-acre Wembley Park in the North West to British Land’s £4bn, 3,000-home proposal for Canada Water in the South East. London attracted more overseas real estate capital in 2017 – £14.2bn according to Knight Frank – than anywhere else in the world.
The construction boom isn’t just limited to residential and commercial buildings. Crossrail, Europe’s largest infrastructure project of the last decade, is expected to add £42bn to the UK economy when it finally opens in 2019, bringing an additional 1.5 million people into a 45-minute commute to London’s major commercial centres. Heathrow’s £14bn third runway could theoretically be completed within a decade, while work continues on the HS2 rail link to the Midlands and the North.
None of these developments has been unproblematic. You could – and many do – argue that foreign investors were attracted by sterling’s weakness, that the construction boom is a long-swelling bubble formed as a result, that it would have been bigger in any case without Brexit uncertainty, that you’ll believe in Heathrow’s third runway when you land on it. You could argue too that London is a special case and doesn’t reflect the realistic prospects for the rest of the country.
But there can be little stronger sign of long-term confidence in a place than foreign investors locking their liquidity into its bricks and mortar. And while the UK can’t build its future solely on its capital city, the fact remains that London is the jewel of the European (let alone the British) economy. Benefitting from a deep pool of international talent and a sophisticated business ecosystem, London is one of only two "Alpha ++" world cities, along with New York – a designation of supreme significance to the interconnected global economy given by the respected Globalisation and World Cities Research Network.
Coventry’s A4053 ring road
Knotted with unusually close junctions, the A4053 around Coventry is a notoriously unpleasant drive, which makes it perfect for autonomous vehicles. The city recently took part in a successful three-year driverless car-testing programme, UK Autodrive, a collaboration between Jaguar Land Rover, Tata Motors and Ford. Further tests have taken place in Milton Keynes, Greenwich, Bristol and Beckton.
It’s all part of a global race to own the future of mobility, a grand clash between upstart tech firms and aged automotive titans. The vision is for cheap, driverless taxi fleets you can effortlessly hail with your smartphone. The rewards could be immense, both for the companies that crack it and the economies that implement it.
Autonomous cars and coaches could revolutionise mass transit, bringing millions of people into the urban economy while reducing pressure on city housing markets and infrastructure. It’s no wonder the government has made it a priority in its industrial strategy. It’s easy to scoff at that ambition, as Britain does not have mega corporations in cars or tech, unlike its American, Chinese, Japanese and continental European peers. But it is nonetheless perfectly positioned to be the place where the technology takes off.
The intellectual firepower is provided by start-ups such as Oxbotica and FiveAI, which have raised £22.6m and £29m respectively for their cutting edge, deep-learning algorithms. There are also world-class research and testing centres such as Millbrook, run by the Centre for Connected and Autonomous Vehicles, and Nuneaton’s MIRA, run by Japanese firm Horiba.
Perhaps surprisingly though, roads like the A4053 might be one of our secret weapons. It’s one thing to navigate a perfectly straight, 200-mile quadruple carriageway in the Arizona desert; it’s quite another to manoeuvre through the streets of a densely packed, living city with an angry Fiesta riding your tail. The data feeding into the algorithms is far richer and, as a result, the algorithms get better faster.
Britain’s regulatory environment is oddly free of the barriers blocking access to rich data in other countries. Unlike obvious world leader the United States, where Uber and Alphabet’s Waymo are competing to perfect driverless cars, the UK is governed by a single regulatory regime for both drivers and vehicles. Our laws have already been amended with the specific goal of allowing commercial driverless cars on any public street by 2021, crucially without needing a human with back-up controls. Even the insurance industry is clearing the path, with the likes of Axa, Direct Line and RSA heavily involved in pilot projects.
Sir David Attenborough
Over recent years, OnePoll’s surveys of the British public have consistently named Sir David Attenborough as our most trusted celebrity. At least two generations have grown up learning about the wonders of the natural world from Attenborough and his formidable canon of BBC documentaries, and not just in the UK.
The documentaries themselves are a handy little export for the BBC. Last year’s Blue Planet II broke all sorts of records, having the biggest advertising-supported audience of any documentary series in the United States for eight years, and more than 250 million views on Chinese giant Tencent’s video-on-demand platform. It even had a species of plankton named after it: Syracosphaera azureaplaneta, the second word translating from the Latin as ‘blue planet’ – incidentally not the first living creature named after Attenborough and his pioneering work.
But by far the greatest significance of these shows is the soft power they project. Scientists have been warning of the danger of marine plastic pollution for decades, yet Attenborough’s thoughtful and sensitive exposition, towards the tail end of 2017, seems to have catalysed a rapid and profound series of policy changes from politicians and multinationals the world over.
The UK Plastics Pact, launched in the spring after Blue Planet II aired, now has 68 members publicly committed to reducing plastic waste across their businesses, including Proctor & Gamble, Coca-Cola and Asda. High street coffee chains Costa, Starbucks and Caffe Nero, meanwhile, have all introduced reusable cups since the documentary came out.
The British brand is still strong abroad, though not in the way some might expect. No one cares that Britannia once ruled the waves, but our creativity and status as a global convener and standard-setter are very relevant. The BBC and Sir David Attenborough’s Blue Planet II points to how we might use that to build a 21st-century ‘brand Britain’ based, in part perhaps, on our green credentials.
The UK employs nearly 400,000 people in low-carbon companies and in their supply chains. Renewable energy accounts for 31.7 per cent of our production. Britain is already the world’s leader in offshore wind power, a market that is expected to reach £30bn globally by 2030, with nearly £19bn of further investment expected between 2017 and 2021.
Though there’s clearly plenty of work to do for Britain to become a truly green country, it’s an example of the opportunities that exist to reimagine our national brand for the 21st century.
The University of East Anglia
Along with finance, education is Britain’s most internationally competitive industry. It won’t astonish anyone to hear that the Universities of Oxford and Cambridge were numbers one and two respectively in the Times Higher Education world university rankings 2019. Yet our ancient universities aren’t the exception, they are the rule.
According to the same rankings, which consider research, international outlook and reputation as well as teaching, the UK has six of the top 30 universities in the world and 29 of the top 200.
Many, but not all, are members of The Russell Group – 24 leading universities with a shared focus on research and a reputation for academic achievement. Norwich’s University of East Anglia, for instance, is in joint 190th position, along with the University of Duisburg-Essen, Shanghai Jiao-Tong and Western University in Canada. Its research strengths include climate change and plant science, and it has a dedicated centre offering pre-degree courses for foreign students hoping to attend university in the UK.
Academic strength in depth isn’t a mere nice-to-have in the knowledge economy. It’s not for nothing that a significant proportion of high-growth, high-technology companies have sprung from university cities, from Silicon Valley to the Cambridge life sciences cluster (see page 14). The universities spin out top-in-class intellectual property but, just as importantly, they fertilise the surrounding area with razor-sharp graduates from all over the world.
Higher education is also a lucrative export for the UK in its own right, with 13 per cent of the international student market in 2015. The following academic year, there were 442,000 overseas students enrolled in the UK – a quarter of all UK university places – plus 708,000 attending courses accredited by British universities abroad, whether online or in international campuses. The Department for Education estimates that the combined export value of tuition fees and other spending by these students was £18.8bn in 2014-15, an increase of 18 per cent since 2010 – and no one really knows the value to the UK economy of the connections the students make with Britain once they leave, or the soft power this creates.
There is some evidence that Brexit has already had a deterrent effect on EU students and academics. Along with a gradual tightening of the rules allowing foreign students to stay and work in the UK after completing their courses, this may have contributed to Australia overtaking Britain for total international student numbers earlier this year, which only goes to show how important it is to protect and nurture this precious resource.
Technology and innovation
The years since the financial crisis have been kind to diners who simply want a quiet night in. Denmark-founded Just Eat, which is now based in the UK and listed on the London Stock Exchange, has created a mobile platform connecting hungry Europeans and their favourite takeaways. Hot on its heels is Deliveroo, another UK company that allows people to order deliveries from restaurants that don’t actually do deliveries.
This is so innovative it’s created an entirely new behaviour among consumers and businesses, some of which have built ‘dark kitchens’, known as Rooboxes or Deliveroo Editions, outside of the high-street restaurants specifically to feed their Deliveroo orders. The business model is so strong that it has spurred a copy-cat service, Uber Eats, from the ultimate bad boy of start-up land.
There are significant and justifiable concerns, however, about Deliveroo’s reliance on a legion of cyclists in the grey area of workers’ rights. Like Uber, it depends on a generous interpretation of gig economy preferences and has yet to actually turn a profit. But the fact remains that most social changes wrought by tech companies are being dreamed up in California or Washington state. Here is an example of a British start-up changing the world.
Deliveroo isn’t alone. The UK is widely considered to be the most entrepreneurial country in Europe, with vibrant hubs in sectors as diverse as fintech and fashion. According to the World Bank, Britain is the ninth-easiest country to do business with, leaving South Korea and the US as the only major economies ahead of us. We’re number eight, meanwhile, on the World Economic Forum’s Global Competitiveness Index 4.0, a measure which pays particular attention to how ready we are for the ‘fourth industrial revolution’ of new digital technologies such as AI and the Internet of Things.
Aside from light-touch regulation regarding starting a business, we also have deep wells of capital available for fledgling firms. While not a patch on that available to US start-ups, in 2017 the amount of venture funding that went to British high-growth companies nearly doubled to a record £8.3bn, according to figures from Beauhurst.
This could well be the battleground of the future. As barriers to entry drop in sector after sector, it’s the nimble businesses and flexible economies that will find opportunity, as their slow-to-change rivals stumble. The UK still struggles to scale companies, often preferring to sell them at an early age to deep-pocketed American rivals, but its strength in start-ups nonetheless positions it very well to handle the quickening pace of change.
Image credit: Foster + Partners