Britain’s leasehold economy – we need to start thinking much bigger

The commentator Aditya Chakrabortty asks a question in the Guardian that I would have been asking myself in recent weeks, except that I already knew the answer.

“Why,” Chakrabortty wanted to know, “doesn’t Britain have a Huawei of its own?”

He goes on to cite the example of the General Electric Company (GEC), which as recently as the 1980s was one of the largest and most innovative engineering and hi-tech corporations in the world, employing more than 250,000 people worldwide – and it was British.

GEC was remarkable. It had fingers in every pie. With Arnold Weinstock at the helm, it was big enough and brash enough to take on all-comers. But Weinstock couldn’t live forever, and with his passing the rats emerged, looking to break the company up, believing that its parts were worth more (to them) than the whole.

GEC was asset-stripped in the 1990s, and in 2006 what was left of it passed into history.

This is not the place to dig into the ignominious story of what was one of the UK’s biggest corporate tragedies. If you want to know more about that, turn to Chakrabortty, who does an excellent job. My aim here is to take up his question: “Why doesn’t Britain have a Huawei of its own?”

The answer is, because Britain during the Thatcher years decided that Britain should give up its conceit that anything America could make, or Japan could make, or Germany could make, or South Korea could make, Britain could make better, or equally well. Manufacturing was just sooo last century. Instead, it was decided that the City of London and the wider financial services sector should take up the challenge of keeping us economically competitive, expanding five-fold so that money itself, rather than “things,” became the commodity on offer.

To cut a long story short, the strategy succeeded massively and failed abysmally at the same time. The City grew, injecting billions into the economy. But as it did so, cities such Birmingham, Manchester, Bristol, Liverpool, Newcastle and Leeds contracted. So did Glasgow. So did South Wales. So did Belfast. From 1980 onwards, just as GEC was being set up to implode, the industrial heartland of the UK was hollowed out. Supermarkets and banks became the new economic giants and the greatest providers of jobs. Careers for ordinary people became a thing of the past. Older people had pursued careers or crafts. Their children, if they were lucky, had “jobs”.

Naturally, there were exceptions: Rolls-Royce, BAE Systems (made up in part of bits of GEC), JCB, Unilever, GlaxoSmithKline, Astra-Zeneca, to name most of them. There are also those companies, formerly British – Jaguar-Land Rover, British Steel, Pilkington Glass, BMW (UK) and others – that are now owned and run by overseas corporations. Finally, there are foreign firms, such as Nissan and Honda, that set up in Britain to take advantage of its automatic access to the single market of the European Union.

The story of the dismemberment of British industry, coupled with the country’s increasingly intense focus on the business of money, has been told and re-told many times. My view is that we made a fundamental mistake in assessing the value of manufacturing in a 21st century economy, equating it with mining and steel foundries as a legacy from the Victorian age. I blame Mrs Thatcher for this. She was not nearly as much of a visionary as her disciples would have us believe.

The result is now everywhere apparent. If we want to construct new nuclear power stations, we have to turn to the French and the Chinese. If we want to build trains, the Japanese and the Canadians are the ones we look to. In shipping, Norway, France, Korea, Lithuania and Poland are the ones who win the big commercial contracts. And, as I have frequently lamented, it is the Germans, the Dutch, the French and the Hong Kong Chinese who provide us with the bulk of our electricity, gas, water and rail services.

Britain has become a leasehold economy. We pay the rent each month or each quarter; we never get to own the property.

But what’s done is done. The next big mistake we made was just as damaging, perhaps more so. We have failed to build the sorts of high-tech companies that could take on the emerging giants of the US and China. We didn’t even try. There is no British Huawei for the same reason that there is no British Google. We gave up before we started, convincing ourselves that the ingenuity and cleverness we display in the start-ups field is somehow equivalent to the creation of a world-beating corporation.

To the British, success is coming up with the idea for an internet start-up that we then sell to the highest bidder, making the founders (usually three of four individuals) millionaires while the buyers – who immediately subsume British genius into their multi-billon-dollar enterprises – go on to make a fortune.

An American business such as Microsoft, on its own, has close to 350,000 employees. Apple provides work for 132,000, and the Google workforce will shortly hit six-figures.

What is the dream of any British team who come up with a brilliant idea? Is it to develop the idea, recruit more staff, step up R&D and invest in a bigger factory? No. Too often it is to cash in and retire at 40.

It needn’t be this way. The UK’s start-up culture, closely tied to our universities, has an excellent reputation. Our people are among the world’s best and there is no doubt that they are helping to keep Britain afloat. But in total the sector provides just 30,000 jobs in the UK, spread for the most part between a myriad of small firms that are often here today, gone tomorrow. That is the reason there is no British Huawei.

Britain has only a fifth of the United States population and is tiny by comparison with China or India. So, it might be a bit of a stretch to imagine an equivalent of Google based in Sunderland. Sage, a market leader in integrated accounting, payroll and payment systems, probably comes closest, employing 13,500 people in 23 countries from its headquarters in Newcastle. Micro Focus, the Newbury-based software and IT developer, is bigger in revenue terms but employs just 4,800. And these are our Big Two.

This is where the European Union ought to have made more of a difference. Internet and IT entrepreneurs from the UK ought to have been taking their ideas to the continent, looking for partners and space in a market of 500 million people. But, frankly, we weren’t up for it – and neither were they.

We speak computer language, but not French or German. It’s not that British innovators don’t work hard. They do. And there are definitely those who are in it for the long haul. But what too many of them are waiting for is the right offer, usually from America or Asia. After that they might start again somewhere else, hoping to repeat their success. More likely, they will invest in property, starting with a manor house in Hampshire, complete with trout farm.

The skills shortage doesn’t help, of course. It’s one thing to produce thinkers and innovators. Britain is actually rather good at that. But assembling an educated workforce to cope with expansion and mass-production is a problem that continues to hold companies back, and Brexit will only make matters worse.

The City didn’t help. London’s moneymen pride themselves on their sophistication and global reach. In a regional context, they think of themselves as Europe’s banker (though for how much longer remains an open question). But what have they done for Britain itself outside of the Square Mile? “We pay our taxes” is about all they can come up with. Beyond setting up provincial hubs in Edinburgh and Leeds, what attempt have they made to rebalance the UK economy? Come to that, what has the government done? Many of the jobs on offer, certainly by British-owned firms, are either local, low-end or dead-end.

Britain doesn’t think big anymore. It thinks small.

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