UK economy needs re-balancing to sustain recovery
11 September 2013
Warwick Business School Dean Mark Taylor has told the BBC’s Today programme that the UK Government needs to start pulling the ‘micro levers’ to make sure the country’s economic recovery is sustainable.
Recent good data has led Chancellor George Osborne to declare the economy has finally turned the corner, but Professor Taylor believes after pulling the ‘macro levers’ for that to be maintained the country’s manufacturing sector needs a helping hand from the Government with some micro intervention.
Professor Taylor, a former senior economist at the International Monetary Fund and at the Bank of England, says the UK economy still needs re-balancing with it still leaning too heavily on the same financial sector that sucked the country into the global financial crisis in 2007.
“We are still heavily skewed and perhaps over-reliant on our financial sector and that can have massive consequences for the economy when it gets out of kilter as it did in the global financial crisis, so there is strong importance in revitalising our manufacturing base,” Professor Taylor said on BBC Radio 4’s Today programme.
“Confidence is returning slowly in the manufacturing sector but confidence only gets us so far. If we don’t have the necessary skills, if we really don’t know how to innovate, or break into those export markets then you can only get so far with confidence, you really need some solutions to those market failures.
“Those big macro levers – the Funding for Lending Scheme, the Help to Buy Scheme - have helped kick-start the economy a little bit, but we really need some ‘micro levers’ being pulled to get the economy moving along on a sustainable basis.
“The recovery at present has been fuelled largely by an increase in consumption, reduction in savings and helped a little by the depreciation in sterling. That is all good news, but for the longer term prosperity of the country we really need to get our manufacturing base back in harness and working to fulfil the long term prosperity of the economy.”
Professor Taylor believes the Government needs to help small and medium-sized businesses more so the UK has a manufacturing base comparable to Germany, which as a result has not been as badly affected by the global financial crisis.
“This may be the wrong kind of recovery, but at least it is a recovery,” said Professor Taylor. “We need to build on that recovery; we need to build our skills, investment, exports and alternative sources of finance for small and medium-sized enterprises for example.
“Markets do work well if they are left to their own devices, but often there are market failures and that is when the Government has to intervene to kick-start something in the market that is not really working. For example, if you are a small or medium-sized company and you want to export, how do you find out how to export outside the EU or to China? It is all very well saying there is a market there, but you really need a bit of mentoring, a bit of help to do that.”
Universities can play a part in helping re-balancing the economy in the medium and long-term by working with companies and educating a new workforce for the manufacturing sector.
“At Warwick Business School and Warwick Manufacturing Group at the University we work with businesses and manufacturers on small courses to improve their knowledge and skills,” said Professor Taylor. “In terms of the workforce we have to think about what is coming next over the next decade, and we have set up the WMG Academy for Young Engineers aged 14 to 19 that will open its doors next year.”
Click here to listen to Professor Mark Taylor on BBC Radio 4's Today programme. He is on after 16mins 12secs.