Inventive and innovative private enterprise has driven the digital technology revolution.
The countries that have benefitted the most economically from the third industrial revolution, made possible by advancements in electronics, telecommunications and computing, will likely benefit the most from the fourth: the disruption of traditional manufacturing and industrial practices by smart technology (such as artificial intelligence, massive machine type communications and personalised medicine). These countries have tended to have robust legal and regulatory frameworks and institutions, intellectual capital and academic research capabilities, stable communication, transport and energy infrastructures and sophisticated financial markets.
Whilst the UK ticks each of these boxes, long-standing structural problems in the economy, in some cases exacerbated by successive Government policy decisions, have combined to inhibit the nation from capitalising on the economic and social benefits of the digital revolution.
Public and private sector capital investment as a proportion of GDP fell from about 20% in 2007 to around 17% a decade later, with R&D investment standing at only about 2% of GDP: some of the lowest ratios of any of the Organisation for Economic Co-operation and Development (OECD) nations. Additionally, an over-reliance on the financial sector at the expense of hi-tech business investment and manufacturing productivity, wide regional variations in unemployment and new job creation rates, disappointing export growth (despite a highly competitive sterling exchange rate) and chronic supply side issues in the housing market have all combined to impede growth across the economy.
In a series of reports and events, we will explore how the UK Government could, through sympathetic legal, regulatory, tax, investment, governance and sustainability policies, create the necessary environment to enable digital innovation that will drive growth and increase prosperity and tax revenues.
We think that this is an important and timely project.
In the 2019 general election, the current Government campaigned, on a "levelling up" agenda. It pledged to reverse the austerity measures of the previous decade and create growth through significant infrastructure investments, particularly in the north of England.
However, the COVID-19 pandemic has blown the Government's spending plans off course. Since March 2020, the Treasury has put in place a wide-ranging support package to protect public services, jobs and livelihoods. Delivering the 2021 Budget, the Chancellor revealed that £407 billion has been committed to these measures to date.
In addition, the political necessity for ongoing support to be provided to businesses most exposed to the financial impact of the EU trade deal will likely create a further drag on delivery of the Government's spending plans.
In the medium term, it is possible that the Government will have to raise taxes and reduce central expenditure to pay down the cost of its COVID-19 borrowing. We suspect that the Government's longer-term priority will be to push ahead as much as it can with its planned infrastructure policies to increase demand as a strategy to grow the UK out of debt.
We believe that the Government needs to go much further than this to maximise the social and economic benefits to the UK of becoming a digital revolution powerhouse. Increased infrastructure spend is only part of the solution, the remainder will require the successful delivery of highly targeted new legal, regulatory, tax, investment, governance and sustainability measures which would, in our view, turbocharge tech related entrepreneurial activity, substantially increasing tax revenues, creating highly skilled jobs and fuelling sustainable, long term, economic growth across the regions of the UK.
Our reports and events will provide a blueprint by which that could happen.
Visit the Mishcon Academy for more learning, events, videos, podcasts and reports.